KPMG report: Why operationalizing transfer pricing is more important than ever

Tax and transfer pricing practitioners must navigate an increasingly complex and uncertain tax landscape

KPMG report concerning the importance of operationalizing transfer pricing

Tax and transfer pricing practitioners must navigate an increasingly complex and uncertain tax landscape, while also responding to global shifts in the way multinational enterprises do business.

Over the last several years, the U.S. and global tax rules have undergone fundamental changes that affect the way multinational enterprises (MNEs) think about transfer pricing, and there is no sign of the pace of new tax regulations slowing down.

The Organisation for Economic Cooperation and Development (OECD) base erosion and profit shifting (BEPS) action items introduced new guidance on how to analyze and document intercompany transactions. The 2017 U.S. tax law (Pub. L. No. 115-97)—the “Tax Cuts and Jobs Act” (TCJA)—lowered the U.S. tax rate and introduced new international tax rules that affect intercompany payments and the tax accounting related to them.

The ongoing OECD inclusive framework “BEPS 2.0” effort is poised to upend the tax world once again by imposing a global minimum tax and granting new taxing rights that would initially affect the largest MNEs but would likely expand later. If passed in whole or part, the “Build Back Better Act” (H.R. 5376) could modify some of the tax rules introduced by the TCJA just five years ago and harmonize U.S. tax rules with the OECD BEPS 2.0 guidance and foreign tax rules.

As if the shifting tax regulatory and compliance framework was not enough of a challenge, MNEs must also address the business disruption caused by the coronavirus (COVID-19) pandemic; trade tariffs; the rise of corporate environmental, social, and governance (ESG) awareness; and digital transformation. Adapting to and making decisions in that environment requires a reliable data pipeline that tax departments can use to comply with the new transfer pricing documentation requirements, assess risk areas and prepare for audit challenges, and perform cost-benefit analyses of potential business and supply chain restructurings.

This is the time for tax and transfer pricing practitioners to ask the hard questions: How should my organization’s transfer pricing processes evolve, given the unrelenting whirlwind of tax and economic disruption? What technologies can be implemented into the transfer pricing process to allow my organization to keep up with the ever-changing tax regulations and reporting requirements?

Read an April 2022 report* [PDF 514 KB] prepared by KPMG LLP that addresses those questions and outlines steps tax departments can take not just to prepare for change but also to capitalize on it by considering robust operational transfer pricing (OTP) processes and technology solutions.

*Originally appearing in Tax Notes International (April 18, 2022) and reprinted with permission of the publisher.

 

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