All companies with cross-border operations have transfer pricing issues. The cross-border prices charged on goods, services, royalties, and loans drive how much tax is paid in each country. Simply stated, tax authorities are concerned about multinationals underpaying taxes through incorrect transfer prices. Transfer pricing audits can result in substantial additional tax and penalties on a global basis.
Transfer pricing also impacts a company's global effective tax rate. We find that many companies can optimize cashflow with a strategic review of transfer prices. Furthermore, some companies can realize substantial tax savings under tax reform through corrections to transfer pricing. Transfer pricing also affects FDII, GILTI, and BEAT calculations under US tax reform.