In recent years, transfer pricing has been one of the most important issues of both tax administrations and multinational companies. In addition, governments have begun to use Transfer Pricing arrangements more in order to prevent the decrease in tax revenues. Although transfer pricing regulations are quite new all over the world, the reason why they are widely used in many countries is that countries that do not have a regulation on Transfer Pricing incur tax losses compared to other countries.
As a result, multinational companies are subject to conflicting demands. Companies are challenged by their partners to reduce their global tax rates effectively, but they must also comply with local legislative provisions and OECD model regulations, which vary in content and interpretation.
In the face of the tax administrations’ opinion whether the pricing of multinational enterprises in their transactions with cross-border related companies is in line with the arm’s lengths principle, multinational companies should be able to defend their transfer pricing principles in such transactions with detailed and valid economic analyzes in accordance with national transfer pricing regulations.
Transfer pricing is not limited to the fact that they act in accordance with the local legislation in the country of operation or the head office of the multinational company. Long before companies can conduct international transactions, make investment decisions, and develop a global tax plan, they need to review and evaluate their transfer pricing policies.