Treatment of Intercompany Transfer Pricing for Tax Purposes

Tax authorities in several countries have intensified their surveillance of intercompany transfer pricing in recent years. This paper examines the legislative and administrative issues related to the treatment of intercompany transfer pricing for tax purposes. It reviews the existing international guidelines and national rules on methods for determining appropriate transfer prices, as well as the issues related to tax administration practices for the implementation of those rules. Various systems, proposed or introduced to improve the predictability of taxation, are also examined. This paper further reviews the recent discussions on the “commensurate-with-income” standard and the pricing methodologies proposed thereunder. It finally reviews some alternative approaches to international income allocation which are proposed or adopted in lieu of the transfer pricing approach.Tax systems;Transnational corporations;Taxation;Tax administration;tax authorities, international tax, double taxation, tax treaties, tax administrations, tax havens, fiscal documentation, tax avoidance, tax purposes, tax treatment, internal revenue, tax liability, fiscal affairs, tax reform, tax refunds, tax planning, tax countries, tax adjustment, tax base, national tax administration, high-tax countries, total tax revenue, tax revenue, tax rates, regional taxation, tax system, foreign tax, tax journal, fiscal affairs department, taxable profits, taxable income, tax authority, tax potential, tax haven, home country, corporation taxes, corporation income tax, corporations taxation, income tax use, tax return, tax office, corporate income tax, tax assessments, domestic tax, corporate tax rates, international taxation, state corporation income tax, taxation issues, tax audits, income taxes, tax burdens, national tax journal, low-tax countries