Borders may seem unimportant to multinational organizations, but national governments don’t see things quite the same way.
Instead, fiscal authorities in countries around the world are shoring up their national tax bases with increasing vigour by strengthening local legislation and imposing higher transfer pricing documentation requirements and penalties for non-compliance.
Multinationals must comply with local rules that vary widely while also interpreting model rules set out by the Organisation for Economic Co-operation and Development (OECD). They must be able to present cogent arguments that support transfer pricing decisions, are substantiated by thorough, authoritative analysis, and that take into consideration local country rules governing their transactions.
To meet all of these requirements, your multinational business should consider an effective global approach to transfer pricing that encompasses arm's-length pricing, not just for tangible goods, but also for services and transfers of intangible assets, group financing, and other key areas.
Some forward-looking businesses also turn their transfer pricing policies into strategic tools for investment and supply chain decisions, as well as for global tax planning. Ideally, you should be thinking about this issue well before any goods are shipped or services provided outside Canada, or any transactions occur.