Waiting for the inspection (video)

It was late morning on Saturday. Romy was asleep in her buggy, and I was sitting in the patio outside, listening to the birdsong, and feeling very smug about my solo parenting skills. But beneath all that, I knew there was a reckoning coming: the inspection when my boss Xiaofang returned home to Chateau Sutton after a week’s absence.

It turned out that the inspection on Saturday evening was relatively painless, mainly due to the fact that Xiaofang had just got off a 12-hour flight from Shanghai. My major let-down, though, was our girls’ hair. I had managed to lose our only de-tangling hair brush half way through the week, and the tangles in our three daughters’ hair were beginning to intensify. Especially with Norah: she could have hidden a 12-pack of colouring pencils in her hair, and no-one would have noticed.

If you look after a multinational corporate group, and you know that its Transfer Pricing is not supported by appropriate intercompany agreements, you might have a similar uneasy feeling about possible tax inspections. If your group has a simple structure, you may as well get the intercompany agreements all sorted in one go – it’s much more efficient than doing it piecemeal. If it’s a more complex group, you’ll probably want to prioritise your efforts.

Here’s a list of factors you may want to consider in your prioritisation:

  1. Imminent or expected tax inspections
  2. Supplies which are fundamental to the group’s value drivers
  3. Supplies to and from countries in low tax and no tax jurisdictions
  4. Supplies to and from other high risk countries, including those which regard ICAs as essential to TP compliance
  5. Types of supply with the highest volume / value
  6. Supplies where the nature of the supply is unresolved (e.g. distributor vs provider of logistics services, royalty vs service charge)
  7. Supplies which significant regulatory / legal implications, such as processing of personal data, licencing of intellectual property, financial services regulated entities

For an overview of our current range of services regarding intercompany agreements for multinational groups, click here.