Transfer Pricing Market Update - February 2011

Throughout 2010, Transfer pricing remained an area of demand for interims. 2011 is set to continue a similar trend.

In the current global economic climate, and with multinational firms accounting for 60% of world trade, companies are keen to get transfer pricing right and benefit from accurate economic profits. If transfer pricing risks are not managed, companies are at risk of negative publicity, decrease in shareholder value or stringent penalties from the Revenue and the OECD.

Currently, there are at least 50 countries with specific transfer pricing legislation and ever-changing regulations. This number is growing on an annual basis. Revenues in respective jurisdictions have increased scrutiny on documentation and companies are at risk of high financial penalties if documentation and transfer pricing policies are not compliant.

2010 saw firms increasing their transfer pricing capability across financial services and commerce. We saw established transfer pricing teams such as HSBC and Standard Chartered Bank grow in size. Notably, we have also seen smaller companies, investment management houses and insurance firms looking to build in-house transfer pricing capabilities for the first time. In assessing increased transfer pricing risk, companies are identifying a cost and risk management benefit of having a transfer pricing presence in-house rather than a total reliance on external advisors. 

Demand for interims

Over the last two years, Heads of Tax have faced a number of transfer pricing issues. Not all of these require additional permanent headcount. Increasingly, companies will need the expertise of a senior transfer pricing specialist on a contract basis to provide extra resource whilst the current team focus on high priority issues such as Advanced Pricing Agreements (APAs).  In addition, interims can support tax teams by providing high value transfer pricing policy review and assisting with a backlog of documentation.

78% of companies expect a transfer pricing audit in the next 12 months, indicating that the appetite for transfer pricing specialists will remain strong.  Transfer pricing will continue to remain at the top of international tax issues facing multinational corporations in 2011.

Transaction history

UBS – Transfer Pricing Manager
Shell – Senior Transfer Pricing Manager
Standard Chartered Bank – Transfer Pricing Analyst
Olswang – Transfer Pricing Associate
Barclays Capital – Transfer Pricing Manager
Cadbury Kraft – Transfer Pricing Specialist
Baker Hughes – Transfer Pricing Manager
HSBC – Transfer Pricing Manager
Chloride – Senior Transfer Pricing Manager
EDF Trading – Senior Transfer Pricing Manager