Transfer pricing perspectives: Winds of Change - PwC

The Asia Pacific (APAC) region is increasingly regarded bymultinational corporations (MNCs) as the key driver for globalgrowth and expansion. This has led to a surge in cross bordertransactions within APAC region and between the APAC regionand the rest of the world. Furthermore, as corporate structuresare less driven by geographies and more by other businessdrivers like product/business units, corporate structuresare ever more crossing geographical regions and countryboundaries. However, tax authorities are still, and will alwaysbe, dictated by national boundaries. As such, in recent yearstransfer pricing has become a central issue for MNCs and therelevant tax authorities. While the arm’s length principle isfollowed by most tax authorities in the APAC region to evaluateinter-company transactions, different interpretations andemphasis may lead to different outcomes. Hence, tax authoritiessee transfer pricing as a soft target with the potential to producea sizeable increase in tax revenue. This potentially results ineconomic double taxation and an increase in the effective taxrate of MNCs.Transfer Pricing Perspectives. October 201157