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Cross-Border Cases
Practice review: a tax authority adjusting related-party pricing
Cross-border related-party pricing without a reasonable basis can be adjusted, with back-tax and penalties.
A common scenario: intra-group cross-border service fees, royalties, or goods pricing lack comparable support, and a tax authority finds them non-arm's-length and makes a transfer-pricing adjustment.
Adjustments often bring back-tax, interest, or penalties and may cause double taxation.
The lesson: cross-border related-party transactions need contemporaneous documentation and a reasonable method, with transfer pricing considered at the structuring stage rather than patched later.