Amid Increased Cross-Border Activity, Demand Soars for Transfer Pricing Professionals
Amid globalization and economic uncertainty, governments around the world have begun imposing tighter trading rules and aggressively pursuing tax revenues. Now, multinational organizations are facing increasing demands from different jurisdictions as authorities attempt to collect taxes on cross-border activities. And according to global surveys conducted by Ernst & Young, the most important concern among tax directors is transfer pricing. From supply chain restructuring, to transfer pricing planning and compliance with documentation requirements, executive recruiting firm, A.E. Feldman says that demand is soaring for professionals specializing in international tax, and more specifically transfer pricing.
Transfer pricing is the pricing of goods and services, including raw materials, products, and payments such as management fees and intellectual property royalties, within a multi-divisional corportation. Essentially, when one subsidiary sells goods or services to another subsidiary in a different country, the price charged for these goods or services is called the transfer price. The rules on transfer pricing requires multinational corporations to conduct business between their subsidiaries at “arm’s length.” That means all transactions between the subsidiaries should be priced as if the transaction was conducted between two unconnected parties.
Transfer pricing affects the division of total profits among parts of a company. Since tax rates vary between countries, multinational corporations can increase their profits with the help of transfer pricing. By lowering prices in countries where tax rates are high and raising them in countries with a lower tax rate, corporations can reduce their overall tax burden and boost profits. This has led to the rise of transfer pricing regulations as governments seek to stem the flow of taxation revenue overseas.
Global tax authorities are becoming more intensely focused on transfer pricing policy and compliance. According to Ernst & Young however, transfer pricing practices remain controversial. Complicating matters, a growing number of countries are introducing documentation requirements and penalty rules. Conversely, in order to mitigate tax risk on all cross-border market driven initiatives, transfer pricing specialists must manage the development of complex transfer pricing design, compliance and audit defense strategies.
The issue has subsequently become one of great importance for multinational corporations. And that is good news for candidates seeking transfer pricing opportunities. From documentation, defense and planning, A.E. Feldman reports that transfer pricing professionals are in high demand.
