According to our 2022 Middle Market Trends Survey 26% of respondents had not considered transfer pricing as a strategy and needed help with it, and over 50% of respondents indicated they were not changing their transfer pricing to move income to a lower tax jurisdiction even with a tax increase on the horizon.
Transfer pricing can be a valuable planning tool for companies that utilize this tax strategy effectively. It goes overlooked as a tax strategy by most business owners simply because of size and lack of awareness. Middle market business owners believe that transfer pricing compliance is something optional that you can do every few years but transfer pricing documentation is required each year and falling behind can be a costly mistake.
An old transfer pricing document cost Coca-Cola an additional $3.5 billion in taxes after they lost a court appeal in a transfer pricing audit.
Fortunately, with a lack of awareness comes opportunities for education and more importantly, tax savings. Your business could pay a lower effective tax rate with the right transfer pricing structure and it’s a great way to mitigate withholding on dividends and interest, high foreign taxes, global intangible low-taxed income (GILTI), and more.
Donna Frye, director of transfer pricing and her team of specialists are experience in all areas of transfer pricing. Our team can provide accurate and updated transfer pricing documentation (so you don’t end up like that beverage company we mentioned), provide audit support, and benchmark your company based on industry leaders to create the most effective policy.
Transfer pricing analysis does not need to be expensive, ignoring it is.
Frye and her team recently prepared a transfer pricing study for an international client that resulted in an effective transfer pricing structure that follows the arm’s length principle. Read more about the international transaction.
Our 2022 Middle Market Trends Survey provided insights about the most important issues for middle market business owners, click here to view our list of the hottest topics.