Transfer Pricing

Tranfer Pricing - Watch Begga Sigurdardottir and Marc Rasch talk about the recent developments in transfer pricing in Luxembourg

Transfer pricing is a term used to describe all aspects of intra-group pricing arrangements, including transfers of intellectual property or the use of intellectual property, tangible property, services, loans and other financing transactions. As multinational groups seek to increase their level of operational integration, complex intra-group transactions across borders have grown rapidly. At the same time, tax authorities in the countries involved are increasingly challenging transfer pricing arrangements and tend to impose stricter penalties, new documentation requirements, increased information exchange and greater audit / inspection activity. Awareness and compliance are, therefore, essential.

Applying a correct transfer pricing policy may, however, not only allow a multinational group to reduce potential tax risks, but it may also create tax opportunities.

Following a general trend around the globe for increased transparency, last year, the Luxembourg tax authorities issued two Circulars on the tax treatment of Luxembourg entities that are mainly engaged in intra-group lending activities. The Circulars, issued on 28 January 2011 and 8 April 2011, confirm the approach of the Luxembourg tax authorities which is to follow the OECD transfer pricing approach. PwC has been advising numerous clients on their financing restructuring and assisting them in complying with the transfer pricing documentation requirements set forth in the Circulars.

             
 

Opportunities

     
   

The challenge

     

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