KPMG advises companies on tighter enforcement of transfer pricing regulations worldwide

'Companies operating internationally are discovering that their transfer pricing position may face challenges from one tax authority, even when that position is well-supported and accepted by other tax authorities operating under the umbrella of the OECD Guidelines,'

said Mr.Ahmed Hussain, Partner in Charge - KPMG Qatar.

Tax authorities looking to enforce transfer pricing regulations are increasing the range of company transactions they will use as a trigger for more detailed investigations, according to insights provided by leading advisors from KPMG's Global Transfer Pricing Services (GTPS) practice.

Among the 'red flags' now seen by tax authorities worldwide as reasons to investigate further are: unusually high profits or losses in a group company; corporate restructurings involving closures or reductions in operations; significant inter-company management fees; dealings with a group company in a tax haven; and location in a low cost country.

These are among the instances of tightening regulations listed in 'A Meeting of Minds - Resolving Transfer Pricing Controversies', a publication from KPMG's GTPS practice focusing on transfer pricing controversy issues, strategies and resolution alternatives, and incorporating contributions from 39 authors from 22 countries.

'A company's priority might be to limit conflicts with its tax authorities, to improve predictability in financial statements, to manage the effective tax rate, or to meet cash flow targets,' added Mr. Hussain. 'The company will likely try to balance a number of these objectives. The important thing is to have a clear and well-supported rationale for the decisions that are taken, so that the authorities can see this is an organization able and willing to defend its policies.'