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Experts claim that MNEs must justify their TP policies in audits.

Tax officials are reportedly scrutinizing audits of multinational companies more closely.

Following increased stringent examination by tax authorities during audits, tax leaders have advised corporations to concentrate more on the explanation of their transfer pricing technique.

Tax authorities are increasingly specializing on TP issues throughout their investigations, according to Ralf Paustian, TP partner at EY in Hamburg, who claims that TP is becoming a more significant problem in audits and that this has altered the way tax audits are handled.

According to Paustian, "The issue of having proper transfer pricing justification and taking care of issues such as company benchmarking standards has become more important."

The increased emphasis on TP has a knock-on effect that increases the likelihood that authorities may notice differences in benchmarking operations.

"Tax directors need to prioritise transfer pricing and the justification for those prices because they will be picked up sooner rather than later," he continues.

Businesses use similar business data for benchmarking exercises, but Marta Pankiv, head of group tax and TP at software firm Tricentis in Vienna, claims that the data is not necessarily the same as the choices made by tax authorities.

For taxpayers, this creates further uncertainty. According to Pankiv, TP experts must be vigilant and continually stay current with legislative changes, especially OECD policy advancements.

She argues that because to the nature of the arm's-length principle, organizations must constantly study the market, update their benchmarking studies, check their TP paperwork, and make sure their inter-company agreements are in place.

According to Pankiv, "It’s not like you prepare your benchmark and then you sleep well for the next five years, it’s just not the case."

To prevent disagreements with tax authorities or having difficulties brought up during investigations, businesses must also make sure that they have reliable processes in place for developing their benchmark policies.

While certain tax administrations may offer guidelines and mandate that businesses update their TP practices on a regular basis, tax experts advise that the timing of such revisions may be crucial.

"You’ll usually have a requirement from the revenue authorities to update it [benchmarking] regularly and to be up to date with what is happening in the [business] environment," according to Pankiv.

Businesses should strive to avoid doing comparability adjustments concurrently with audits, according to Ben Henton, worldwide head of TP at the UK-based banking institution Computershare.

"What you don’t want to be doing is dealing with a tax inquiry or challenge from an auditor, and then trying to use a comparability adjustment with the benefit of hindsight. This can undermine the credibility of such an adjustment," according to Henton.

He emphasizes how important it is for businesses to make sure that they exclude instances of extreme economic hardship or other unusual conditions from their third-party comparability studies. For a more accurate financial result, taxpayers should look to their own company outcomes.

Henton emphasizes that you should aim to stay out of long-term legal battles with the tax office about benchmarking.

There are instances where a single corporation or a small number of companies control a market. The OECD standards provide TP teams a technique to do an analysis based on the similarity of the risks associated in various situations.

"If you’re not really capturing the risk that you’re looking to transfer price, then you’re not really achieving anything with your comparability analysis," he continues.

Businesses have a variety of alternatives to take into account when choosing the best TP benchmarking procedure.

Businesses in Europe frequently use Bureau van Dijk's Amadeus database system.

Approximately 21 million enterprises in Europe are fully profiled in the Amadeus database. Anyone, including revenue services, consultants, and global corporations, can utilize this subscription-based system, but it costs money.

Most organizations hire consulting companies to handle the benchmarking process because of the amount of labor needed to run these systems.

Regarding the various benchmarking solutions, Paustian says, "basically, we all look at the same databases, but for multinationals it’s about deciding whether they should do it themselves and pay for the service or to outsource it to the tax advisers."

Companies have access to RoyaltyRange, Thomson Reuters OneSource, and Orbis, among other databases.

A variety of information systems, including KtMINE, RoyaltySource, Bloomberg, and S&P Global Market Intelligence, are also available to corporations for rates of compensation and interest.

Henton claims that whereas European businesses have a harder time accessing comparable data, businesses in the US are spoiled with options.

"When it gets outside of the US and European debt markets, then you are really struggling [for