Multinational businesses often operate under the transfer pricing rules of several countries.
A transfer pricing policy that satisfies one country’s requirements may not necessarily satisfy another country’s rules. Countries can differ in their documentation requirements, deadlines, audit practices, and approaches to comparability and profit allocation.
This creates a risk of double taxation, where two countries seek to tax the same income.
For this reason, companies should consider the transfer pricing rules on both sides of an intercompany transaction. Coordinating the positions of the related companies can help reduce disputes, penalties, and the risk of inconsistent tax treatment.