It’s complicated. Here’s why.
- It’s about measurement and movement of value from one legal jurisdiction to another.
- It’s about addressing the tax implications attached to the values by each jurisdiction.
- It’s about planning for where you need cash.
Moreover, it’s about understanding why you’re doing it.
If you’re already doing business in multiple countries and want to establish appropriate pricing, we explore clients’ motivations before recommending a pricing strategy. Growth companies planning for due diligence in connection with a liquidity event will likely have a lower risk threshold than taxpayers in more stable, predictable industries.
The most compelling part of the transfer pricing analysis is the focus on the value of business components and the impact this focus has on business planning. This requires a cooperative effort between management and the transfer pricing/international tax advisor to explore business exigencies and how to minimize the impact of taxes across a multi-national organization.
And because it is complicated, one size does not fit all. But make it a priority, because the more broken it is, the more expensive it is to fix.
Don’t expect magic.