Transfer Pricing

In an ever-changing global economy, transfer pricing has emerged as a key tax issue for multinational companies. It is an important driver of shareholder value, providing an opportunity to optimise the value of a business by effective tax rate and franking credit management.

Managing transfer pricing risk remains critical in an increasingly aggressive environment. The Australian Taxation Office (ATO) has continued to stress its focus on transfer pricing and is currently considering adjustments which, in aggregate, amount to billions of dollars. Taxpayers will continue to face regular investigations from the regulator as transfer pricing is included as an integral component of the risk reviews being rolled out under the ATO's co-operative compliance program.

News: Review of Australia's Transfer Pricing rules

On 1 November 2011 the Assistant Treasurer announced that the Government will reform the Australia's transfer pricing rules to bring them in line with international best practice. The announcement was supported by the release of a detailed Consultation Paper, outlining the broad principles upon which any change will be based. Click here to read about the implications of this announcement.

PwC has made a submission to Treasury responding to the proposals outlined in the Consultation Paper and the Government's press release. Our submission was provided in two parts:

• a general submission on the broad concepts proposed
• General submission [PDF 362 KB: Nov 2011]
• a specific submission on issues relating to branch structures, which the Government intends to review separately from the general transfer pricing rules.
• Specific submission on branch issues [PDF 246 KB: Nov 2011]

Click here to listen to our podcast around what this review really means for you and Transfer Pricing in Australia.

How PwC can help you

We will work with you to ensure your organisation's international financial position is effectively managed and your fiscal risk covered, and together we will put your company in the best possible position to take advantage of the benefits of globalisation and international structuring.

Our team is able to draw upon global networks to offer you access to specialist knowledge and leading edge tools and solutions relevant to your industry in the areas of:

• Co-operative compliance »
  
  The Tax Office's new co-operative compliance program heralds an important change in the direction by the ATO, which is actively targeting large and medium sized organisations. Consequently, organisations need to understand the impact of the changing rules and their approach to transfer pricing risk and dealings with the ATO. Traditional approaches are no longer adequate - increasingly proactive management of the tax review process is vital.

• Business transformation planning »
  
  Competitive pressures, technological advances, new trade agreements and the opening up of new economies coupled with more sophisticated and demanding clients, are just some of the issues facing business today. In this environment, an increasing number of multinational corporations are seeking opportunities to realign their global operations to achieve commercial efficiencies and maximise tax opportunities, making transfer pricing an integral part of any business transformation.
  
  Transfer pricing planning for business transformation focuses on opportunities to realign profit generating aspects of the business in a tax optimised manner. This can enhance shareholder value through improvements to factors such as:

  • Effective rate of tax
  • The ability to recognise and/or utilise tax losses
  • The generation of franking credits for shareholders.

• Compliance and document management »
  
  Effectively and efficiently documenting and bench marking inter-group transfer pricing policies and practices is vital for organisations seeking to protect the group from revenue authority scrutiny and potential adjustments and penalties. In addition, there is a move towards simplifying the collation of data and ensuring greater efficiency in the preparation of supporting transfer pricing documentation. Profiled below are the ways PwC assists organisations simplify their compliance and document management.
  
  Global Core Documentation (GCD) - A methodology which leverages off the development of base documentation to provide an efficient global solution to the problems multinationals face in meeting the transfer pricing documentation requirements of numerous countries.
  
  Transfer Pricing Project Platform (TP3) - A web based solution for organising and storing transfer pricing documents and information, TP3 provides organisations with a framework for managing knowledge about planning, documentation and defence issues related to transfer pricing.

• Audit defence strategies »
  
  With an increasing number of large businesses subjected to transfer pricing audits, it is essential to develop a sophisticated and tailored audit defence strategy. The PwC Transfer Pricing team has the experience and tools to assist organisations facing an audit. We are also able to help position you to reduce the risk of an audit.
  
  The audit defence strategies include the effective use of Advance Pricing Arrangements (APAs), which are often used as a useful strategy to resolve disputes with the ATO and/or as a preventative approach where audit risk may otherwise create uncertainties. By using APAs and developing an audit defence strategy, we can help you:

  • Achieve greater certainty about transfer pricing
  • Deliver cost savings in transfer pricing audit defence disputes and litigation
  • Embed a cost effective defence in potential audit situations.

Interaction of thin capitalisation and transfer pricing provisions - webcast now available

This audiocast discusses the recent transfer pricing taxation ruling relating to the interaction of the transfer pricing and thin capitalisation rules. More…