Transfer pricing: financial administration’s number one hit

Increasingly often, we can hear abbreviations such as ATAD, BEPS or about country-by-country reporting, master files or local files. Appendix 12 to income tax returns, summarising related-party transactions, has become an integral part of corporate taxpayers’ lives. As an example of the prevalence of this issue we may include the tax authorities’ automatic demand for the submission of local transfer pricing documentation in tax inspections. All of this significantly increases the administrative burden on taxpayers. 

In the past, tax officials preferred to avoid transfer pricing issues and inspections were quite rare. Today, it is an entirely different situation: every official claims to be a transfer pricing expert, many times holding rather unorthodox opinions on what corporations should have done under specific economic circumstances. In many cases, the tax authorities’ procedures verge on abuse of the state administration’s power, similarly as in the case of issuing securing orders. The financial administration’s growing interest is also evident from the development of additionally assessed tax because of transfer pricing. In 2016, the financial administration carried out ca. 900 inspections, showing a year-on-year increase of more than 10%.

Transfer pricing inspections as well as technical news, including our experience with cross-border dispute solutions, will be discussed at KPMG’s traditional Transfer Pricing Forum, taking place on Tuesday, 23 May. You may register for the event here.