Much has happened over the past 12 months since the last Deloitte ITR Controversy publication, both in terms of wider political and economic developments, and more specifically within the world of tax and transfer pricing.
Focusing on transfer pricing, the most recent OECD statistics show continuing increases in the number of cases brought to mutual agreement procedures (MAPs), with almost 1,000 new transfer pricing cases – just shy of the record-breaking preceding years. This is in addition to the more than 1,000 new advance pricing agreement (APA) requests made across a growing and diverse set of countries, as taxpayers continue to see real value in managing transfer pricing controversy upfront through proactive engagement, with the aim of avoiding audit and MAPs.
Across individual countries, the general trend of increased controversy and a higher number of court cases continues, where we are now consistently seeing over 150 cases globally a year.
These trends form the basis of three of our articles.
Firstly, we examine the overall tax litigation landscape, covering the broader environment and trends, as well as notable cases.
We then examine India and China, two geographies with interesting transfer pricing environments, put into sharper focus given their size and market importance.
Finally, we delve deeper into the automotive and pharmaceutical industries, examining how broader controversy trends interact with industry-specific nuances.
In our next two articles, we examine instances where transfer pricing has been particularly impacted by the broader political and economic developments, with a specific country focus on the US, given its changing landscape.
We then look at the very topical and increasingly important interaction between customs and transfer pricing, exploring their alignment and differences, and how to best consider duties in transfer pricing, both more broadly and with an eye to the developments during this year.
For our final three articles, we consider specific areas where there has been interesting activity and developments over the past couple of years from a transfer pricing perspective.
Firstly, financial transactions, where the addition of Chapter X to the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations in 2022, coupled with a higher interest rate environment, has accelerated a pre-existing trend of increased controversy and litigation in this area.
Secondly, the interaction between documentation and controversy, examining the role of documentation and its consideration and use in audits. Here we also consider recent developments in certain countries regarding the burden of proof, evidentiary standards, and penalty protection.
Lastly, the role of transfer pricing in the context of special purpose vehicles, which are frequently used for regulatory reasons or to ring-fence risk or liabilities but which may conflict with principles of substance and the role of people in a post-BEPS world.
We hope you enjoy the insights and perspectives shared throughout these articles and they help equip you as you navigate the challenges and opportunities in the evolving transfer pricing controversy landscape.
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