Dealing Effectively with the Challenges of Transfer Pricing
This report addresses the practical administration of transfer pricing programmes by tax administrations. Technical analysis of how transfer prices should be computed in accordance with the arm’s length principle is outside the scope of this report. Instead the report focuses on the practical experiences of a number of FTA member countries and some non-member countries. The report discusses ways in which the management of transfer pricing programmes can be optimised, so that transfer pricing audits and enquiries are conducted efficiently and in a timely manner, for the benefit of MNEs and tax administrations alike. It is concerned with the practical steps tax administrations need to take to correctly identify transfer pricing cases that merit audit or enquiry and then to progress those cases to as early a conclusion as possible.
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Selecting the right cases
This chapter examines the process of risk identification and how tax administrations go about selecting the right cases for transfer pricing audit or enquiry. It examines the information sources on which risks assessments are based and the different ways in which tax administrations approach the information gathering process. It includes a summary of the features that may suggest that a transfer pricing risk is present in a case. It considers the role of commercial understanding in the process of risk identification.
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