EY has published its 2019 Transfer pricing and international tax survey, covering responses from more than 700 senior tax and transfer pricing executives representing the Americas, Europe and Asia-Pacific.
The results show the changes that began with BEPS ‘accelerating almost exponentially’ with the OECD’s pillar one and two proposals for reform of international tax rules to address challenges of the digitalised economy. The majority of respondents said that the greatest impact of global tax reform will be felt in fundamental transfer pricing rules. The operations most affected by reform are expected to be supply chain (41%), followed by treasury operations (29%) and intellectual property strategy (29%).
Key findings of the survey include:
a majority (79%) described today’s international tax environment as ‘uncertain’, with 40% of respondents regarding it as ‘very much’ or ‘extremely’ so;
tax risk is the most critical issue driving transfer pricing strategies for 64% of respondents;
the top three areas of tax risk were given as increased information sharing among tax authorities, information being made public (reputational risk), and lack of centralised and consistent control in responding to tax authorities;
only a third of the companies maintain current documentation of transfer pricing for each country of operation, with 45% doing so only for high-risk jurisdictions and 22% only ‘as needed’;
only 11% of respondents indicated high satisfaction with their current global transfer pricing documentation process;
only 22% saw the documentation process as a strategic opportunity to clearly articulate transfer pricing strategy; and
a minority of companies (19%) manage their transfer pricing matters solely in-house, while 48% outsource or co-source to a single external provider and 33% use one or more providers.
The most critical areas of tax controversy in the past have been transfer pricing of goods (64%), intragroup financial services (41%), and VAT or GST (34%).
The main areas in which tax controversy is expected to increase in future are:
challenges to intellectual property (up from 33% to 49%); and
permanent establishment challenges (nearly doubling from 20% to 39%).
A large proportion of respondents (84%) say their tax departments are becoming proactively involved in responding to evolving tax rules around intellectual property (IP), yet only 29% say their businesses are working to identify or bring about value-creating IP.
Advance pricing agreements (APAs) are used by 37% of respondents to reduce tax risks. A majority of those who use them (57%) say they are either very satisfied (18%) or satisfied (39%) with their APAs, while 43% say they will be significantly more likely to use an APA in future.
Only 20% of respondents have requested competent authority assistance under an APA and only 15% of these said they have confidence in the process.
EY has published its 2019 Transfer pricing and international tax survey, covering responses from more than 700 senior tax and transfer pricing executives representing the Americas, Europe and Asia-Pacific.
The results show the changes that began with BEPS ‘accelerating almost exponentially’ with the OECD’s pillar one and two proposals for reform of international tax rules to address challenges of the digitalised economy. The majority of respondents said that the greatest impact of global tax reform will be felt in fundamental transfer pricing rules. The operations most affected by reform are expected to be supply chain (41%), followed by treasury operations (29%) and intellectual property strategy (29%).
Key findings of the survey include:
a majority (79%) described today’s international tax environment as ‘uncertain’, with 40% of respondents regarding it as ‘very much’ or ‘extremely’ so;
tax risk is the most critical issue driving transfer pricing strategies for 64% of respondents;
the top three areas of tax risk were given as increased information sharing among tax authorities, information being made public (reputational risk), and lack of centralised and consistent control in responding to tax authorities;
only a third of the companies maintain current documentation of transfer pricing for each country of operation, with 45% doing so only for high-risk jurisdictions and 22% only ‘as needed’;
only 11% of respondents indicated high satisfaction with their current global transfer pricing documentation process;
only 22% saw the documentation process as a strategic opportunity to clearly articulate transfer pricing strategy; and
a minority of companies (19%) manage their transfer pricing matters solely in-house, while 48% outsource or co-source to a single external provider and 33% use one or more providers.
The most critical areas of tax controversy in the past have been transfer pricing of goods (64%), intragroup financial services (41%), and VAT or GST (34%).
The main areas in which tax controversy is expected to increase in future are:
challenges to intellectual property (up from 33% to 49%); and
permanent establishment challenges (nearly doubling from 20% to 39%).
A large proportion of respondents (84%) say their tax departments are becoming proactively involved in responding to evolving tax rules around intellectual property (IP), yet only 29% say their businesses are working to identify or bring about value-creating IP.
Advance pricing agreements (APAs) are used by 37% of respondents to reduce tax risks. A majority of those who use them (57%) say they are either very satisfied (18%) or satisfied (39%) with their APAs, while 43% say they will be significantly more likely to use an APA in future.
Only 20% of respondents have requested competent authority assistance under an APA and only 15% of these said they have confidence in the process.
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