Intercompany transactions make up roughly 33 percent of all the world’s trade. This is a huge amount of global trade traffic, and it’s introduced a big challenge for businesses worldwide: accounting for transfer pricing.
Transfer pricing refers to the rules and methods governing pricing transactions that occur between enterprises under shared ownership or control. Whenever different parts of a company transact with each other — i.e., trading parts and supplies between separate entities in different countries — the cost of these transactions is a form of transfer pricing.
Companies are always looking for ways to increase their efficiency in order to remain competitive and profitable. Many businesses look to minimize their overall tax liability by operating in countries with lower tax rates.
Unfortunately, this introduces new problems. When businesses change their structures and adjust their transfer prices, the affected countries suddenly lose a share of tax revenue. To mitigate such losses, these countries introduce transfer price adjustments. So, if a company restructures its worldwide operations without considering these variables, they could face significant penalties and double taxation.
This is why working with Aprio is so important. As one of the largest international tax, accounting, and business advisory practices in the Southeast, we’re a leader in transfer pricing and can help your company manage international operations with minimal exposure to penalties and other consequences related to intercompany transactions and issues concerning tax jurisdictions.
Tax laws are constantly shifting. In light of modern transfer pricing practices, some regulations are even being totally reset. For example, the OECD/G20 Base Erosion and Profit Sharing project is an initiative that will permanently alter the tax landscape for global businesses. Recent changes to the U.S. Tax Cuts and Jobs Act have also added new tax concerns for enterprises.
If you’re not aware of and flexible to these changes, you can be hit with crippling penalties. This is why Aprio’s services are so critical.
We connect businesses with transfer pricing tax and accounting services to ensure internal trading is optimized for tax purposes, but we also provide ongoing support to help in the event of transfer pricing controversies. We can even alert you to new tax laws and changes that introduce risks to your company. Additional benefits of working with Aprio include:
Optimizing your transfer pricing practices is essential, especially following changes to policies such as the U.S. Tax Cuts and Jobs Act. These reforms often change variables such as the U.S. corporate tax rate while also introducing new taxes or modifying key definitions. Sometimes, these changes present totally new liabilities for companies.
Business owners with operations around the world are especially at risk since each nation is constantly revising its own tax laws. So, you need not only be aware of U.S. tax laws but all regulations that are in effect for each country where you do business.
This is important for all global businesses, from startups to long-running industry leaders. Aprio offers the following services to provide optimal transfer pricing solutions to companies at various stages of maturity:
Ready to work with Aprio? If you’re worried about transfer pricing pitfalls, get started with a transfer pricing study. This unique process follows these five steps:
The United States has led the charge in the aggressive regulation of transfer pricing. In recent years, however, many of the nation’s key trading partners have followed suit, adding new regulations and penalties to keep global companies from exploiting transfer pricing loopholes. Though these regulations have introduced significant compliance and reporting burdens, working with a partner like Aprio means you can still benefit from international transfer pricing without falling behind in terms of accounting and reporting.
Since 1952, clients throughout the U.S. and in more than 40 countries have counted on Aprio to build value, manage risk, and drive growth. If you’re facing a transfer pricing challenge, let us help you turn it into an opportunity.
Contact Robert Verzi for help with transfer pricing, accounting, IRS reporting, and more.
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