From a buyer’s perspective, this could arise from the need to integrate the target’s business with its current operations, exploiting historic intangible property differently to how it was used pre-acquisition, and achieving cost reduction and operational efficiencies (e.g., driving synergies from integration, avoiding duplication of teams or functions). A holistic, end-to-end approach to value creation is required, whether the taxpayer is buying or selling.ĭeals typically assume a synergy case-tax and transfer pricing can help deliver against this.
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A backwards-looking view of company performance and initial projections into the future are not enough to gauge the full potential and value of a business. The key to unlocking the full potential of deals, both for sellers and buyers, is value creation. Equally, as transfer pricing goes to the heart of the operating model, it plays an important role in preserving value in a deal. As such, it has never been more important, and challenging, to effectively manage transfer pricing risk. BEPS placed more emphasis on how and where key business risks are controlled, and therefore increased flexibility in when key decision makers are located means it can be harder to manage transfer pricing outcomes.Īdd to this the pressure on companies to maximize shareholder value as they emerge from the pandemic and the pressure on tax administrations to generate revenues to address rising public debt levels during the pandemic. With new and innovative ways of carrying out business, traditional approaches to transfer pricing may no longer be appropriate.Īdditionally, multinationals are seeking increased flexibility on where senior management are located, and the pandemic has accelerated the trends towards remote working.
The OECD base erosion and profit shifting (BEPS) program led to a wave of substance-based transfer pricing rules and reporting requirements. Just as companies have adapted to these, BEPS 2.0 is here with a new framework for global taxation and even more complexity on the horizon.īusiness models are also evolving as companies react to a variety of commercial and geopolitical issues, including climate change and the broader environment, social, and governmental (ESG) agenda, new technologies, remote working, and global trade tensions. The international tax landscape has changed significantly in the last 10 years.
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