Trends in Transfer Pricing

Global Research Bulletin

Insight to Transfer Pricing trends faced by multinationals operating in multiple jurisdictions.

Deloitte recently commissioned an extensive, global, independent research study to better understand emerging Transfer Pricing trends faced by multinationals operating in multiple jurisdictions. South African taxpayers which for part of a multi-national enterprise are also faced with the prospect of trying to comply with the daunting TP documentation and supporting information retention requirements.

South Africa in focus

South African tax decision makers will almost certainly agree with these key findings derived from the independent research study. South Africa’s TP rules are evolving in close conjunction with the OECD guidance on BEPS and in some cases these rules go significantly further than those outlined by the OECD. The final version of these rules is being awaited after a spirited response from taxpayers and practitioners to the draft notice. Certain of the requirements – which will place a heavy compliance burden on taxpayers in terms of the Tax Administration act - were considered to be unreasonably onerous.

So this global research by Deloitte should be of great interest to South African taxpayers affected by TP and the increased focus on BEPS. Of particular interest will be the global trend towards increasing centralisation and automation of reporting standards.

South Africa has proved to be an early adopter of CbC reporting (with effect from 1 January 2016) and all indications from SARS are that the revised OECD documentation guidelines will be implemented soon as well.

Executive summary

Businesses are looking to increase control over their Transfer pricing positions in order to minimise risk. They are becoming more centralised, focusing on process standardisation and consistency, and seeking technology-enabled solutions. Forward-thinking companies are taking a strategic approach to Transfer Pricing. They are rethinking their processes, technology choices, and management philosophy of Transfer pricing activities to better match today’s evolving tax landscape.

Key findings

• The pace of change in the Transfer pricing world appears to be accelerating as a result of commercial globalisation and the OECD’s Base Erosion and Profit Sharing (BEPS) initiative.

• New regulations and fear of inconsistent application of existing laws are driving risk concerns.

• Growing resource challenges stem from both the increased volume of work and the relatively limited number of qualified Transfer Pricing professionals.

• There are low levels of satisfaction with the current approach to Transfer pricing, a high degree of uncertainty, and no single, proven model for success.

• Nearly all survey respondents indicated that their organisations rely, to some degree, on outsourcing and anticipate an increasing need for more specialist Transfer pricing resources, through both in-house recruitment and increased outsourcing.

• The trend towards global coordination and centralisation is rapidly increasing.

• Overall, there is a desire to better leverage technology and increase process automation.

• This global research bulletin provides a snapshot of the current state of Transfer pricing as well as anticipated future trends

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