How shifting transfer pricing policies are reshaping the global business landscape

Transfer pricing (TP) continues to move up the strategic agenda for multi-national groups, as regulatory pressures intensify and economic conditions remain uncertain. Driven by the increasingly complex operations of global businesses and the watchful eyes of tax authorities, TP is under more scrutiny than ever.

From the roll-out of BEPS 2.0 to economic headwinds and supply chain restructuring, businesses face a dynamic environment that demands agile, forward-thinking TP strategies.

Economic volatility: reassessing pricing models in real time

Global economic conditions – from high inflation and rising interest rates to recession risks – are reshaping TP considerations. Cost-plus models and intercompany service arrangements are particularly vulnerable, with inflation impacting cost bases and mark-ups.

Interest rate fluctuations also call for renewed focus on the pricing of intercompany financing, with updated benchmarking vital to reflect market conditions. In downturns, declining profitability may put pressure on TP policies, especially where intercompany royalties or management fees are involved. In such cases, proactive documentation and risk management become even more critical, especially in light of BEPS 2.0 compliance expectations.

Supply chain disruption: aligning TP policies with operational change

Geopolitical instability, reshoring trends and trade protectionism are prompting significant shifts in global supply chains. As functions and risks are redistributed across jurisdictions, TP policies must keep pace to ensure that profits are allocated in line with economic substance.

Changes in value creation often trigger changes in TP models – and with that, increased attention from tax authorities. Strong, contemporaneous documentation is key to supporting any repositioning of profit across the group.

Tax authority scrutiny: preparing for greater enforcement

Tax authorities around the world are becoming more sophisticated in their TP enforcement strategies, with greater use of data analytics and a sharper focus on high-risk areas such as intangibles, services and financial transactions.

As audits increase in frequency and complexity, businesses should be prepared for heightened dispute risk. Robust TP documentation, effective governance and early-stage risk assessments will be crucial in defending positions and resolving issues efficiently.

BEPS 2.0 and TP policies: adapting to a new global minimum tax framework

The OECD’s Base Erosion and Profit Shifting (BEPS) 2.0 initiative – particularly the implementation of Pillar Two – introduces significant challenges. With a 15% global minimum tax now in scope for large multi-national enterprises, jurisdictions are adopting the rules at varying speeds, creating a fragmented compliance landscape.

Key implications for TP include the need to align existing policies with new minimum tax thresholds, avoid double taxation and manage new reporting obligations such as the GloBE Information Return. As the framework evolves, careful analysis of the interplay between TP and BEPS 2.0 new rules will be essential.

How we can help

Our transfer pricing specialists support multi-national businesses in navigating this evolving landscape. From designing practical TP policies and preparing defensible documentation, to managing audits and disputes, we help ensure compliance while protecting value.

Get in touch for a no-obligation conversation.