Transfer Pricing

Transfer pricing is the number one commercial and fiscal issue facing companies with intra-group international transactions. This fact has been consistently borne out by many surveys over recent years. The ATO along with tax authorities from other jurisdictions are aggressively seeking out what they perceive as their “fair share” of the corporate tax pie. Jurisdictions with “mature” transfer pricing regimes have invested heavily in recruitment and initiated more targeted and sophisticated transfer pricing reviews. On the other hand, countries which previously had little or no transfer pricing legislation, or Guidelines, have rapidly been introducing them in order to redress this perceived imbalance.

The Global Financial Crisis had a number of implications from a purely transfer pricing perspective. In hindsight, it merely slowed down the pace of corporate globalisation. It put more pressure on multi-national companies to critically look at their operational and organisational structures and gave fiscal authorities further impetus to aggressively pursue taxpayers. As a consequence, taxpayers should expect that their cross border international transactions will face intense scrutiny both domestically and internationally from fiscal authorities.

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Australia

Australia, together with other OECD members countries, bases its transfer pricing rules on the “arm’s length principle”. In essence, all international transactions, of whatever nature, between related parties, must be in accordance with this principle. Actual transactions, will be reviewed as if they occurred between third parties and must be disclosed, (Schedule 25A)* documented and justified accordingly. Over recent years, The ATO has released specific compliance and documentation requirements that it expects taxpayers to meet. (Please refer to TR 98/11 for more guidance on documentation and setting and reviewing transfer pricing in international dealings.)

Taxpayers who fail to meet the ATO’s requirements can face the prospect of a transfer pricing risk review or audit. The ATO introduced its Strategic Compliance Initiative (SCI Project) to focus on this specific area. The SCI is ongoing. Risk reviews and audits are invariably very time consuming and costly. Managing your transfer pricing risk is one specific area where RSM Bird Cameron can assist.

*The Schedule 25A is gradually being replaced by the International Dealings Schedule, (IDS), initially for Financial Services taxpayers. However, by 2012 all taxpayers will have transitioned to the new Schedule.

	Our Approach At RSM Bird Cameron we have an integrated national and international network of transfer pricing specialists who can assist taxpayers in meeting their specific and unique transfer pricing requirements. Our expertise covers both industry specific and transaction based transfer pricing issues. Click here to read more.
	Key Contacts Click here to contact your local and international RSM Bird Cameron transfer pricing experts.