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Asia Pacific: Interplay of transfer pricing and customs valuation methods

Asia Pacific: Transfer pricing, customs valuation

Commonalities between some of the OECD transfer pricing methods and the customs valuation methods contained in the World Trade Organisation (WTO) valuation agreement thus far have not converged to the point where there is regional consensus on how to treat transfer pricing adjustments for customs purposes.


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Despite the fact that Asia Pacific countries are parties to the WTO agreement that recognises that the price between related parties is not, in and of itself, reason to question the pricing between those parties, related-party transactions and post-importation adjustments continue to raise the customs risk profiles of importers across the region. In some Asia Pacific countries, this risk is considerably increased when there are higher duty rates, high rates of customs penalties, and very active customs audit regimes. 

The maturity level of dealing with customs-related party pricing and post-importation adjustments differs greatly across countries in the Asia Pacific region.

At one end of the spectrum, countries such as Australia have:

  • Formal, publicly available customs valuation and transfer pricing policies
  • The ability to obtain related-party pricing valuation rulings (providing protection from customs penalties)
  • Access to customs duty refunds for post-importation adjustments
  • Bulk disclosures and payments for post-importation increases to price, customs duty, and goods and services tax / value added tax (VAT)

At the other end of the spectrum:

  • Some countries have limited, if any, guidelines on transfer pricing and customs valuation.
  • Post-importation adjustments can result in customs audits upon disclosure, or there is no mechanism to disclose such adjustments.
  • There is an inability to obtain customs duty refunds for price decreases.
  • There can be penalties for short payments of customs duty and VAT when there are price increases.
  • Importers can have inter-company prices for goods revalued by customs authorities.

KPMG observation

The question of how business can mitigate customs risks related to transfer pricing is one that professional advisers face on a daily basis. The answer as well as the answer to the question how business can attain a level of consistency across the region is not one that is easily answered. However, as a general principle, the very first step in mitigating customs risks is to determine that transfer pricing and customs valuation principles and laws are examined in concert, and that customs valuation is not an afterthought—that is, after the transfer prices and methods have been set and not as post-importation adjustments arise.

Businesses need to be aware that transfer pricing methods that best suit customs transactions in Europe and the Americas may not necessarily apply for customs transactions across the Asia Pacific region. Also, while income tax authorities generally seek to determine whether or not an appropriate level of profit has been achieved at an entity level, customs authorities seek to determine whether the price of goods in any transaction has been affected by the relationship between the parties so as not to understate the value and associated duty liability. In the context of understanding that customs duty is a transactional tax, in the Asia Pacific region, there are often high customs duty rates; little policy for addressing transfer pricing adjustments for customs valuation purposes; and considerable customs audit activity. Prudent businesses will put in place solid mechanisms to deal with the relationship between transfer pricing and customs valuation.


Read a November 2018 report prepared by the KPMG member firm in Australia


For more information, contact a trade and customs professional with KPMG in Australia:

Leonie Ferretter | +61 2 9455 9330 |

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