Warren Novis of KPMG’s transfer pricing team takes a look at the main areas of change and asks what these changes mean for the scope and focus of transfer pricing audits.
Widespread changes to the framework for international taxation are being driven by an increasing appetite from the public and many governments for increased regulation of the tax affairs of multinational enterprises (“MNEs”). The complexity of twenty-first century business has accelerated the pace which governments have set to adopt these changes into local laws.
Areas of change which are likely, in practice, to have greatest impact on the conduct and focus of transfer pricing audits for MNEs include:
The extent and rapid pace of change of the above measures present a major challenge for business to remain tax compliant. The same changes offer tax authorities the chance to embark on targeted audits of MNEs to enforce compliance with new measures. Tax authorities are increasing their investment in teams and resources focused on increased intervention activity based on newly legislated tax rules and drawing on enhanced taxpayer data from global information sharing exchanges.
The natural conclusion is that the practice and experience of tax and transfer pricing audits will be different – and the difference is being experienced now.
Learn more about the new transfer pricing rules and what your business can do to prepare for transfer pricing audits.