Published in: ITR - International Tax Review
During tax audits, tax authorities frequently focus on companies within multinational groups that book steady losses over several years. In these companies, behind the losses authorities often find transfer pricing policies that are not in compliance with the arm’s-length principle. This observation is supported by the 2017 OECD Transfer Pricing Guidelines 2017 (para 1.129 – 1.131).
According to the OECD Guidelines, when a company that belongs to a multinational group consistently books losses while its multinational parent remains profitable, authorities must analyse its tax practices, paying particular attention to the TP policies.