Transfer pricing: why returns are rarely risk-free

In our experience intra-company financing is a fertile area for Transfer Pricing investigation and disputes. It is standard practice for large businesses to raise capital finance centrally (typically within a group or central treasury function) and to transfer the funds raised to other parts of the business for use in some economic activity examples of which would include R&D investment financial trading or infrastructure investments. As a result it is common for capital to be raised in one tax jurisdiction and used in another and tax authorities take a close interest in the pricing and other terms applied to the transactions that govern the internal capital transfers. Given the sums involved small differences in terms can have significant...