According to Margaret Kent, TransferPricingConsortium.com & Robert Feinschreiber, Charles River Associates, until now, tax administrations had lacked sufficient databases to undertake comprehensive country-by-country transfer pricing audits. Now, as of end of June 2018, tax administrations are ready to begin these audits and assessments in earnest against MNCs. The transfer pricing implementation rules cast a long shadow – they target ownership of trusts, foundations, and tax haven arrangements. Here are 10 examples – a partial list -of database issues a tax administration might look to for the MNC:
1. The group’s “footprint.” Where do the activities of business take place?
2. Has the enterprise shifted low-risk activities into a high-tax jurisdiction?
3. How important are related-party revenues compared with total revenues?
4. How does the company’s key financial ratios differ from those of the industry?
5. Do the company’s results differ from industry market trends?
6. Do the company profits compare with the company’s activities in the jurisdiction?
7. Does the company have high profits in low tax jurisdictions?
8. Has the company shifted its intellectual property from actual activities?
9. Does the company make us of dual resident entities, entities with no tax residence, or stateless entities?
10. Do current activities and entities substantially differ from past activities?
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