Australia - Transfer pricing policies of multinationals under increased scrutiny 

June 19: The tax morality debate has raised the profile of transfer pricing to a broader audience, with governments and the media putting some companies and their tax structures under public scrutiny.

On releasing an issues paper [PDF 274 KB] on multinational profit shifting in May 2013, the Australian Assistant Treasurer expressed a view against the ability for multinational companies to use aggressive tax practices. However, notwithstanding this increased scrutiny, businesses remain under continuous pressure to restructure their value chain in order to maximize shareholder value and remain competitive.

Given this, senior executives of businesses increasingly need to be confident that their transfer pricing structure is sufficiently robust—both at a technical and practical level.

Among other items, for transfer pricing purposes, it is critical that taxpayers properly align the legal and economic substance of their related-party transactions. This can pose a challenge to companies when changes in their commercial operations are not properly addressed by updated transfer pricing policies and legal agreements.

Businesses may want to consider conducting a transfer pricing “health check” as a review and risk assessment of their current and proposed transfer pricing structure. The initial focus of a “health check” would be on the transfer pricing policies and legal arrangements in relation to significant related-party dealings, complex financing structures, and business restructurings.

For more information, contact a tax professional with KPMG’s Global Transfer Pricing Services practice in Australia:

Anthony Seve

+61 2 9335 8728

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