If you're looking to expand overseas or set up an Australian entity, transfer pricing is likely to become an integral part of your cross-border taxation strategy.
The Australian Tax Office pays close attention to intra-group pricing arrangements between entities that are considered a single multinational group but have divisions or entities that are treated and measured separately for tax purposes.
A transfer price is the amount charged for the supply and acquisition of goods or services that take place between divisions or entities.
Transfer pricing is important because it can have significant implications for business tax.
There are four broad steps to ensuring your transfer pricing arrangements are set up properly:
- Ensure that your international dealings between associated enterprises are clear and properly documented
- Adopt the most appropriate transfer pricing methodologies for those enterprises and document them
- Apply the most appropriate method when goods and services are supplied or acquired, determine the impact on profit and tax (the arm's length outcome) and ensure that these are properly documented
- Implement appropriate support processes that enable you to review and adjust for material changes and documentation of your processes.
No two businesses are the same and it's essential that your transfer pricing arrangements are suitable for your business structure. Getting the right advice will help you to establish:
- An international tax strategy incorporating transfer pricing arrangements
- Appropriate compliance and planning for tax in Australia and overseas
- Compliance and management documentation
Get in touch with our International Tax team to discuss your current circumstances and talk us through your expansion plans. To find out more about transfer pricing, you can also download our Transfer Pricing Factsheet.