Members of KPMG’s Global Transfer Pricing Services practice look at current transfer pricing regulations and how they have been affected by the current economic environment and the way cross-border business is being conducted. Government spending to spur economic growth and provide increased social services, such as unemployment benefits, has been accompanied by reduced tax receipts generating significant deficits. Not surprisingly, many governments are focused on increasing revenue from multinational companies by asserting that any profits arising from the business are linked to their jurisdiction.
As this publication shows, tax audit controversy (specifically related to transfer pricing) was up sharply in 2010 and is expected to continue this trajectory in 2011 and beyond. Even if global markets improve, the results from recent challenging years will remain open for controversy for the next several years.
As a result:
- High-tech companies should seek to address a range of issues, such as treatment of losses, renegotiation of internal and external agreements, attribution of profit, and restructuring charges
- Particular care should be taken to establish the business factors leading to any unusual outcome and reconcile treatment to existing intercompany arrangements
- Given the multiyear nature of many transfer pricing methodologies and tax audits, issues arising from this economic shock will remain relevant for the foreseeable future.