What’s your strategy in managing transfer pricing risks?
Transfer pricing continues to be one of the most significant tax risk areas faced by multinational companies in the automotive industry. Enforcement efforts are on the rise throughout the world (in jurisdictions such as the U.S., Mexico, China, and India). Due to the BEPS project (OECD’s international project to combat base erosion and profit shifting), there is heightened scrutiny on transfer pricing. Most jurisdictions have specific transfer pricing disclosure and documentation rules. For example, the U.S. provides 30 days, Mexico allows 15 days, and China allows 20 days for compliance. In India, submission deadline is upon notice of audit. Also (as an additional example), in the U.S., the TP documentation is requested as part of the IRS field audits (matter of procedure).
Going forward, multinational companies in the automotive industry should expect increased compliance requirements in most jurisdictions. Given this transfer pricing environment, it is prudent for multinational automotive companies to gather information and update support documentation on a regular basis. The following transfer pricing podcast series provides an overview of the current landscape and practical considerations for managing transfer pricing risks.