Transfer pricing becoming major tax issue for multinationals

Transfer pricing has emerged in the global economy as one of the most important tax issues for multinational companies. Managing transfer pricing risks and efficiency through pricing planning is a key value consideration.

With revenue authorities continuously improving its infrastructure to monitor transfer pricing, it is important for global enterprises to be well aware of the regulations to ensure compliance in their international operations, since penalties and interest can be backdated.

Multinational transactions between affiliated companies are not limited to the exchange of goods and services, but can include the transfer of intellectual property, loans and other financial transactions. Transfer pricing impacts corporate income taxation and compliance with the different requirements of multiple overlapping tax jurisdictions has become complicated.

Recent international high pro le transfer pricing cases have been determined on one points of law and the testimony of expert economists. We expect it would only be a matter of time before we would see a number of litigation matters relating to transfer pricing taken to court in Africa.

Understanding transfer pricing has never been more important, or more complex. Tax laws in various African countries as well as developments at OECD, such as the BEPS Action Plan, are presently reshaping international tax and transfer pricing as we know it.