Panta Rhei – Revisiting and Revising your Transfer Pricing: How to Review and Sustain the Effectiveness of the TP Model?

Transfer Pricing (TP) and TP models in multinational enterprises (MNEs) are by no means static. However, it is also true that these models do not normally change overnight. Once a TP system has been successfully developed and implemented – which is a considerable project in itself, taking into account TP system development and automation, price setting and related documentation in view of data and IT system(s) availability, internal organizational and external market factors – change may be more incremental than disruptive over time.

In that context, a number of influencing factors may be drivers for change and can play an important role in designing, reviewing, and revising TP systems correspondingly, such as:

These influencing factors may be interlinked. Consequently, they may also impact upon each other to an extent. Their specific relevance (weight) will vary case by case or industry sector by industry sector.

For example, demand changes in terms of markets, customers and/or technologies may trigger M&A activities, which lead to subsequent business restructurings and/or business model adaptation needs. Tax audit findings at one point in time (i.e., backward-looking) may address recurring fact patterns in subsequent audit cycles and thus necessitate a forward-oriented adaptation of an existing TP model in an MNE, however, then ideally adopting a 2-sided view, even though the arm’s length principle is subject to varying interpretation by different tax authorities, corporate taxpayers and other stakeholders in many countries worldwide.

Therefore, it is a considerable challenge for TP teams in MNEs to design, maintain and enhance compliant and effective TP models on a global scale, in view of the simultaneous and ever-increasing regulatory development towards more tax transparency and accountability requirements for MNEs.

Together with my colleagues Adnan Begic (Kellanova), Rishabh Baid (NetApp) and masterfully moderated by Kirsty McMillan (Forvis Mazars Singapore) - handling the online presence of one panelist (ML) with ease - our panel outlined a broad range of business experiences and best practices encountered in different industry sectors such as FMCG (food/ non-food) or Technology and provided interesting insights on how to effectively and efficiently revisit and revise TP approaches in MNEs for the 2024 TP Minds Asia audience gathered in Singapore this time.

Thanks to Shivani Rathore , Kylie Lee and the entire Informa Connect team behind the scenes for the invitation, preparation and excellent conduct of the conference!