Transfer Pricing In One Lesson

This book provides a concise and pragmatic introduction to transfer pricing. Approaching the subject from an economic and business perspective, it familiarizes the reader with the basic concepts without getting sidetracked by tax law. In turn, the book draws on case studies to demonstrate the identification and application of appropriate transfer pricing methods for the most common intercompany transactions. The intuitive step-by-step guidance, together with integrated Excel-based tools, will equip the reader to ensure compliance with the arm's length principle and thus to minimize tax risk. Based on the post-BEPS OECD Guidelines, the book's content is applicable to a global context.

This book provides a concise and pragmatic introduction to transfer pricing. Approaching the subject from an economic and business perspective, it familiarizes the reader with the basic concepts without getting sidetracked by tax law. In turn, the book draws on case studies to demonstrate the identification and application of appropriate transfer pricing methods for the most common intercompany transactions. The intuitive step-by-step guidance, together with integrated Excel-based tools, will equip the reader to ensure compliance with the arm’s length principle and thus to minimize tax risk. Based on the post-BEPS OECD Guidelines, the book’s content is applicable to a global context.

Transfer pricing is one of the most relevant and challenging topics in international taxation. Over the last century, nearly every country in the world introduced transfer pricing rules into their domestic legislation. Indeed, it was estimated that profit shifting generated by the improper application of transfer pricing rules has resulted in global tax losses worth USD 500 billion for governments – 20% of all corporate tax revenues. It is thus imperative that all tax professionals thoroughly understand the nature of transfer pricing and how the growing body of applicable rules works in practice. In this crucially significant volume, stakeholders from government, multinational companies, international organisations, advisory groups and academia offer deeply informed perspectives, both general and specific, on the practical application of transfer pricing rules, taking into consideration all the most recent developments. With approximately 160 practical examples and 90 relevant international judicial precedents, the presentation proceeds from general to more specialised topics. Such aspects of the subject as the following are thoroughly analysed: what is transfer pricing and the purpose of transfer pricing rules; the arm’s length principle and its application; the consequences of a transaction not being in accordance with the arm’s length principle; the transfer pricing methods; the mechanisms to avoid and resolve disputes; the transfer pricing documentation; the attribution of profits to permanent establishments; the transfer pricing aspects of specific transactions, such as services, financing, intangibles and business restructurings. The application of transfer pricing legislation is arguably the most difficult task that taxpayers and tax authorities around the world must face. With this authoritative source of practical guidance, government officials, tax lawyers, in-house tax counsel, academics, advisory firms, the business community and other stakeholders worldwide will have all the detail they need to move forward in tackling this thorny aspect of the current tax environment.

Business tax strategy is at its most challenging when success ushers in the promise of major growth. At this ‘moment of truth’ the thorny special issues associated with international expansion loom over the fate of the company. These issues can be summarized in two words: transfer pricing. In this extended hypothetical case history, presented in narrative style with an abundance of graphic material, the authors lay bare the minutest details of transfer pricing planning and how the process engages and affects the ambitions, insights, and interactions of the group of business people and advisors involved. Because of this exposure to decision making and consulting dynamics, the reader gets a taste of the trade-off between ‘correctness’ and practicality. In fact, a more practical approach to the subject is hard to imagine. The book’s format, innovative in every way, finds plenty of room to define every term, cite every source, and describe every opportunity or pitfall affecting the tax aspects of such processes as moving into new jurisdictions, restructuring operations to create regional or global centres of excellence, or changing supply chains. Scores of information-packed tables, graphs, flowcharts, and other illustrations – often in the form of slide presentation screens or ‘real-world boxes’ – enhance the in-depth discussion of such aspects of international tax planning as the following (among much else): choice of tax status; investors and control; licensing and intellectual property issues; accounting methods; recruiting foreign personnel; and tax audits by revenue authorities. In a business environment where transfer pricing has emerged as the most dynamic area of international taxation, following extensive legislative activity and rulemaking, this remarkable book bridges the abstract theory of transfer pricing and its everyday practice in a very accessible way. No other book on the subject is so practical or so down to earth. Lawyers and other professionals in international taxation and tax law will find it enormously appealing, informative, and useful.

Transfer pricing refers to the pricing of cross-border intercompany transactions. Transfer prices influence the tax base of multinational enterprises, and thus also the fiscal revenues of the countries where they are doing business. The importance of transfer pricing has significantly expanded over time and culminated with the work of the OECD on Base Erosion and Profit Shifting (BEPS). With the globalisation of business activities, the need for States to prevent tax avoidance, and the risk of double taxation faced by multinational enterprises, transfer pricing has become a key question for multinational enterprises and tax administrations alike. Introduction to Transfer Pricing intends at providing a general introduction to the fundamentals of transfer pricing. The book is focused on explanations of the principles that apply, albeit to various extents, in most countries. Although the majority of these principles are provided by the OECD the views of other international organisations – in particular the United Nations and the European Union – are also taken into account. Moreover, the book illustrates the fundamentals of transfer pricing with concrete examples based on the structures often used by multinational enterprises when conducting cross-border business activities. Also included are relevant court cases from a variety of countries. Among the issues and topics covered are the following: the arm’s length principle in theory and practice; transfer pricing methods; intercompany transactions involving intangibles and financial transactions; common types of transfer pricing models; cross-border business restructurings; the substance requirement for transfer pricing purposes; attribution of profits to permanent establishments; and the prevention and resolution of transfer pricing disputes. This second edition was updated based on the 2022 OECD Transfer Pricing Guidelines and the 2021 UN Transfer Pricing Manual.

Transfer Pricing is an issue that has material implications for tax risks faced by MNEs. Yet, pragmatic guidance on identifying and managing transfer pricing risk is lacking. Consequently, CFOs and other stakeholders tend to underestimate risks while overestimating the costs for mitigating such risks. The first objective of the Survival Guide is to shed light on typical transfer pricing risks and provide an intuitive "risk matrix" that is designed to help CFOs as well as tax advisors to develop a quantitative understanding of the relevant risks. The second objective is to outline targeted mitigation strategies. The mitigation strategies outlined in the Survival Guide are based on pragmatic considerations rather than complex analysis. The aim is to provide you with concise explanations and help you to differentiate between tasks that are considered a "must" for mitigation purposes and those that can be regarded as merely "nice to have" The immediate utilization of the Survival Guide is as a frame of reference for making informed decisions about the scope and target of your transfer pricing projects. The Survival Guide presents a framework for thinking about transfer pricing risk that will also benefit tax professionals as well as academics with an interest in understanding the nature of transfer pricing risks.

Transfer Pricing is an issue that has material implications for tax risks faced by MNEs. Yet, pragmatic guidance on identifying and managing transfer pricing risk is lacking. Consequently, CFOs and other stakeholders tend to underestimate risks while overestimating the costs for mitigating such risks. The first objective of the Survival Guide is to shed light on typical transfer pricing risks and provide an intuitive "risk matrix" that is designed to help CFOs as well as tax advisors to develop a quantitative understanding of the relevant risks. The second objective is to outline targeted mitigation strategies. The mitigation strategies outlined in the Survival Guide are based on pragmatic considerations rather than complex analysis. The aim is to provide you with concise explanations and help you to differentiate between tasks that are considered a "must" for mitigation purposes and those that can be regarded as merely "nice to have" The immediate utilization of the Survival Guide is as a frame of reference for making informed decisions about the scope and target of your transfer pricing projects. The Survival Guide presents a framework for thinking about transfer pricing risk that will also benefit tax professionals as well as academics with an interest in understanding the nature of transfer pricing risks.

The book pays attention to the tax treatment of transfer pricing in a single perspective of analysis since the most important principles (the arm’s length -ALP- i.e. conditions that independent parties would share, and the sale country) are agreed worldwide. They must be applied in the same way regardless of the economic sector or industry. A country survey overlooks the most important issue of the fiscal problem, that is, the ability to project a unitary policy in compliance with the ALP (or with the sale country principle) and that should be audited by one sole (only theoretically) existing tax authority. The practical part and examples disclose how rules should be/have been applied, how legal proceedings can arise/arose regarding their application , how they were decided if litigation truly occurred, and finally the author’s motivated opinion with special focus on which is “the breaking point” of a specific analysis. The term “breaking point” is used to explain which can be the factual and/or the interpretative change that is able to modify such analysis and thus the solution. Extract from the preface of prof. Reuven Avi-Yonah: “this book is a must read for any serious student of the topic and an important contribution to understanding how the ALP is applied today as well as to how it should be applied. It is an invaluable contribution and should be read widely by both tax lawyers and accountants and by tax policy makers”.