Introduction to Transfer Pricing Asia
Transfer pricing is becoming increasingly important throughout Asia for two reasons:
- Double taxation - multinational enterprises face the pressure to reduce their composite tax rates and increasingly focus on transfer pricing as an after-tax solution.
- Governments are increasingly likely to view transfer pricing as a revenue source
The exterprise can expect many differences in transfer pricing compared with those of its trading partners: relationshipships that constitute “related parties” and“control,” documentation, priority and selection of transfer pricing methods, the range of permissible results, advance pricing arrangements, audits and the appellate process, timing, the burden of proof, and penalties.
A multinational taxpayer can often avoid double taxation and reduce its comprehensive tax base by viewing transfer pricing as a cross-jurisdictional objective. The enterprise might be able to apply transfer pricing techniques to cut percentage points from its comprehensive effective tax rate by viewing the entirety of its cross-border operations.