TP is often seen as a backward-looking compliance function - focused on managing the risk of a tax authority challenge. And while it is always essential to manage TP risk, especially given the increased number of disputes we are seeing across our client base, we see TP differently, as it can contribute to optimising your tax position and achieving scale.
Increasingly we are helping our clients use TP as a lever to expand internationally:
- Tax efficiency – Many businesses are experiencing growth in international markets. This may give rise to mismatches between where value is created in the business and where profits / losses are being recognised. Appropriate TP policies can remove this misalignment and can lead to increased tax efficiency.
- Cash repatriation – A flexible TP framework can efficiently repatriate profits to service debt or for investment. It can also facilitate the provision of funding to where it is needed in the group.
- Exit readiness – TP is a material area under due diligence. We are increasingly seeing TP disputes during a transaction that result in a price-chip. Having a defensible TP policy can reduce this risk considerably.
- Expansion - A robust TP model from the outset provides a model that is scalable and flexible for international growth and future changes to the business model.