Inflation and it’s ever-increasing Transfer Pricing Implications

We’re all aware of the impact COVID-19 had on businesses, from supply chain disruptions to ever-increasing prices, but this now paired with Europe’s current crisis has only meant for more problems with inflation increasing and prices surging higher than ever. 

While inflation is a common factor in a company's transfer pricing, the uncertainty created by the pandemic and the conflict in Ukraine is anything but common. As a result, companies are encountering multiple issues such as data problems as part of their TP planning. 

We’re also seeing businesses who are becoming more hesitant to invest, attempting to find alternative locations to relocate certain transactions in order to plug a supply chain gap, particularly for multinational companies that rely on centralised sources from Ukraine and Russia. As companies take a wait-and-see approach, they may renegotiate intercompany agreements to account for the number of changes in supply chains, potentially exacerbating the war's disruption.

Multinational corporations must consider the TP implications as they restructure their operations and change intercompany agreements, gathering as much information as possible to weigh the costs and benefits.

Increased economic uncertainty is clearly making it difficult for consumers and businesses alike, who are now bearing the brunt of rising prices. With a decrease in both investments and spending, the economic recovery that was expected after the pandemic, is becoming increasingly unlikely. 

Even more so, taxpayers may face greater uncertainty than ever before, but strong TP documentation will provide some security until the global economy eventually stabilises. It would appear as though documentation is one method of managing the response to economic turmoil once again.

TP International is always on the lookout for senior #transferpricing talent to support our ongoing client demands. If you are experienced with #TP planning or controversy and are looking for a new challenge, get in touch with one of the team today.