How to overcome practical issues in dealing with year-end transfer pricing adjustments
A complete guide to calculate, analyse and process year-end adjustments
In the world of transfer pricing the end of the year is traditionally the moment for a multinational enterprise to reconcile the actual financial results of the various group companies with the group’s applicable transfer pricing policies. If the actual figures deviate from the group’s transfer pricing policy, year-end adjustments may be considered.
Not adhering to the transfer pricing policies may result in serious challenges made by tax authorities, which could eventually result in transfer pricing adjustments (and double taxation), interest and penalties.
This article elaborates mainly on the practical aspects of year-end adjustments. The purpose is to provide guidance on how to actually calculate, analyse and process year-end adjustments.
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This article contains:
- Guidance on how to actually calculate, analyse and process year-end adjustments, along the lines of the following steps:
- Testing of the results: what would be the relevant variables to be tested?
- Analysis and decision process: what analysis should one perform and what circumstances should be taken into account?
- Size of the adjustment: how would you calculate the exact amount of the year-end correction?
- Processing of the adjustment: how would you actually execute the year-end adjustment?
