Transfer Pricing
RSS Issue FeedBACKGROUND
Transfer pricing refers to the prices charged, or the process for arriving at them, in cross-border transactions among related entities. It is the means by which multinational corporate groups apportion their income for income tax and other purposes among the different countries in which the businesses operate. The arm’s length principle, or ALP, represents the global standard for evaluating transfer prices in international transactions. Over the past several years, the OECD has focused significant attention on the ALP as embodied in its transfer pricing guidelines. The OECD undertook a detailed review based on the experience that tax agencies and taxpayers have gained since 1995 in applying the guidelines. This work culminated in the release in 2010 of revisions of the transfer pricing guidelines. These revised guidelines continue to endorse the ALP as the right standard.
CHAMBER POSITION
The Chamber believes that the ALP represents a balance between the interests of corporations trying to compete globally with tax agencies seeking to receive a fair share of the tax base. Further, the Chamber believes that deviating from the ALP incurs the risk of losing dynamic R&D and intellectual property jobs. It is a longstanding principle, has been continuously studied, and provides both multinational groups and tax agencies a single international standard for agreements that provide these agencies a fair share of tax revenues while simultaneously avoiding double taxation problems.
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