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In the CFO Journal section of today's Wall Street Journal, the article "Hot Markets, Tax Headaches" highlights the challenges in Brazil and India yet seems to simplify what is normally portrayed as a complex area for the OECD member countries alike. Should taxpayers infer that it has been simplified for OECD countries?

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Tax Professional Answers

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Kathrine Kimball
While it is true that India and Brazil can be considered outliers compared to other transfer pricing regimes, many of the OECD member countries have their own subtleties in the application and documentation of what might otherwise be generalized as a common OECD platform. To that point, France, an OECD member country, has a more emphatic requirement to provide more detail on the policy itself and the application, not just a testing process. Transfer pricing continues to be one of the most contentious areas of international tax for precisely this reason!

In addition to gauging the range of requirements of each jurisdiction within your structure, it is also critical in the current economic environment to understand the inevitable changes occurring within your business, both externally and on an intercompany basis. Investing in fact-finding and due diligence to ensure that the characterization of your intercompany transactions is in sync with your policy, that your method continues to be the "most appropriate," and that the economic analysis is derived from the most reliable data is time well-spent.

Develop an ongoing relationship with a transfer pricing advisor that will take the time to understand your business and will be your sounding board throughout the year so that you can respond strategically, and in real-time, to your colleagues. Your advisor will also help you navigate those subtle transfer pricing methodology and documentation differences from one jurisdiction to the next by weaving them into an efficient transfer pricing strategy that is consistent with your company's tax risk profile.
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