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Taxand South Africa advises on global transfer pricing (TP) risk management.
The realities of the business environment in which multinational groups operate today consist of a shrinking domestic market and an ongoing pressure to reduce costs. In addition, multinational groups are also faced with the different expectations of different stakeholders and the increased disclosure requirements of financial data. It seems that many multinational groups may have risk management structures in place, but often lack proper control mechanisms.
Transfer pricing governance needs to be based on the strategic goals and aims of transfer pricing, and multinational groups must consider how to manage their transfer pricing risks and processes to achieve the these goals. It is important to identify individuals within a multinational group who understand transfer pricing and ensure that there is constant communication between these individuals.
At the same time, the management of multinational groups needs to handle the expectations of various stakeholders such as shareholders, banks, tax authorities, auditors and the general public. While shareholders expect a high net profit, public society and tax authorities expect companies to pay their fair share of taxes, while banks also expect proper transparency and auditors expect reasonable tax assurance.
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Multinational groups should undertake a transfer pricing risk management assessment to review their specific business circumstances, evaluate their transfer pricing risk exposure and to mitigate and manage those risks, both for previous years of assessment as well as for future years of assessment.