Support in local transfer pricing audits

A transfer pricing audit is an investigation by a tax authority to ascertain whether a company is compliant with transfer pricing regulations. Tax authorities conduct such audits to ensure that their taxpayers are compliant and report sufficient profit (act at arm’s length). There is quite some media and political pressure on tax authorities to ensure that their treasury chest does not miss out on corporate income tax from the local entities of MNEs. To achieve this, they carry out audits and have implemented quite some transfer pricing regulations.

Although initially based on a legislative framework such an audit is often influenced based on cultural aspects, the political climate, the personal relationship with the auditor and how you act in such a process. Especially at the start, harm can be done in the further process (and outcome) by the way questions are answered and how to act. These differences can be quite detailed while having a large impact, for example a simple word used in an answer can be highlighted going forward.

Therefore, it is important that your company is prepared for audits and receives professional support when you end up in such an audit.