What should you do in case of a transfer pricing audit?

With transfer pricing becoming a hot topic on the agenda of the tax authorities, you should not be surprised if your company will be subjected to a tax audit soon.

First of all, know your rights!

Transfer pricing is the field where the taxpayer is the one who must prove he did nothing wrong. And a torough inspection always ends with a report and a notice of assessement or a notice of base taxation revision.

In order to understand how a tax audit is conducted the notification letter should mention:

  • type of inspection (general/partial);
  • period of time to be covered for each assessement/contribution;
  • the place where the inspection will be conducted;
  • type of examination (by survey/electronic);
  • possibility to postpone the inspection.

Final discussion on tax inspection report is the right of the taxpayer and must be carefully prepared and the decision must be registered in the report.

TPS recommends that multinational corporations no longer view transfer pricing issues as an unlikely and isolated risk. More and more tax authorities have started to share information. Audits are detailed, well prepared by tax inspectors and more and more sophisticated, and enforcement actions (adjustments and penalties) can be severe.

This environment requires taxpayers to take a proactive and coordinated approach to understand their transfer pricing arrangements and global, regional as well as local documentation requirements. Transfer pricing risks must be identified and addressed. Transfer pricing disputes and audits must be avoided, managed and resolved. All issues should be coordinated and aligned across multiple jurisdictions before they end in larger business concerns.

TPS can assist you in all stages of controversy by offering:

  • design and implementation of the audit strategy;
  • management of audit process including presentations, negotiations (adjustments/penalties – if applicable), settelement.

We believe that controversy management includes a continuing cycle of evaluation and adapting to changed circumstances. There is often no single solution to manage a risk exposure and our experienced professionals are able to guide you through the many options available within the controversy landscape and determine the best strategy for the business as a whole.