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Transfer pricing and customs values

Question

 
Our group trades internationally and has a number of related subsidiaries across the world. The import values declared to the local customs authorities are based on our transfer pricing policy. Do we need to be concerned about local customs authorities challenging the values imposing fines and/or claiming underpayment of customs duties? To what extent can we use the support provided in our transfer pricing documentation to defend our claim that the customs values are set in accordance with the arm’s length principle?
 

Answer

 
Imagine the following scenario. A large UK multinational group sells its produce to its wholly owned distribution companies overseas. After a longstanding dispute with the customs authorities in one of these countries the local distribution company agrees on a £160m settlement for alleged under-declared import values ...
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