In recent years, tax authorities globally have intensified their focus on transfer pricing (TP) compliance – not solely through traditional audits, but increasingly via comprehensive transfer pricing forms. These structured disclosures, which require taxpayers to report detailed information on intercompany transactions, have become a critical tool enabling tax administrations to conduct data analysis and to identify audit targets with precision.
The Transition Towards Structured Disclosures
Jurisdictions such as Germany, the United Kingdom, and Australia have recently (almost) implemented detailed TP Forms that require annual submission. These jurisdictions’ tax authorities are considered relatively advanced in transfer pricing, which means chances are other jurisdictions will follow. Jurisdictions as Belgium, France and Poland have these forms already in place for multiple years.
Forms typically have to be submitted at the same time as the tax return, but approaches differ per jurisdiction. The questions in the TP form differ per jurisdiction, but the overall goal is in principle precise audit selection and obtaining more success in audits. The latter is also partly achieved when a taxpayer already fills in several datapoints and their positioning without thinking this through properly.
Why Accurate TP Forms Matter More Than Ever
Typically, in-house tax responsible persons will focus substantially more on the appropriateness of local results, the TP policy, local activities and the related storyline when an audit starts. There are typically insufficient resources to review each jurisdiction in detail each year to see if there have been any (small) developments in the business. This makes that TP forms may not be filled in in the most appropriate fashion and answers can be leveraged in audits by tax authorities (which may happen 5 years later).
Over time, tax authorities obtain a substantial amount of data and may use various analysis mechanisms to pinpoint tax audits.
Regardless of timing, the direction is clear: tax authorities are shifting away from high-level narrative explanations in favor of structured, verifiable data that supports rapid and systematic analysis.
There is a growing trend toward audit selection being guided by data analytics instead of random sampling or general financial red flags. For multinational enterprises (MNEs), this means maintaining control over TP compliance processes is now more critical than ever. Even minor mistakes, such as inconsistencies between TP forms and statutory accounts, or a box that was wrongly selected , can serve as trigger for further scrutiny or full-scale audits.
What This Means
This evolving landscape increases the importance of robust internal processes, data alignment, and generally being in control on transfer pricing. An MNE may have a solid TP policy and be reasonably compliant, yet still attract attention if a TP form is filled in by the local finance person and unknowingly mistakes are made.
Operational Transfer Pricing therefore becomes increasingly critical to have in order as well as ensuring internal stakeholders are well aware of what to do, when to do it and who to involve or where to leverage accurate and consistent information from.
Trust arrives on foot and leaves on horseback is a Dutch saying that definitely applies in the world of taxation. As such, if you have been a solid taxpayer for years but make, unknowingly, some mistakes because you have your processes not in order it may take years (including intensive audits) to regain trust with the respective tax authority.
Conclusion: Get your processes and controls in order or become a firefighter
TP forms reflect a broader trend toward data-driven, analytics-enabled enforcement. For MNEs, the risks associated with inadequate data governance, errors, or alignment are growing. Getting your processes and controls in order has become critical. Likely, you will otherwise overtime become a firefighter in various tax audits.
How Quantera Global Can Support
We support MNEs from A to Z in Transfer Pricing and can help you quickly get on board with the best practices that match the risk profile and risk appetite of your (type of) company. We understand there is a balancing act between what you would ideally want to do and the reality and budgets and resources you have available.
It can be a bit overwhelming to determine where to start. We typically support our clients in setting their Transfer Pricing roadmap and what makes the most sense to prioritize or simply share what we would do if we were in their shoes. We are flexible regarding the extent you wish to outsource, do yourself or use software and are simply here to help in an adequate manner.
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