As alternative investment funds continue to thrive in complex and evolving markets, there are increasing requirements for greater tax transparency, and tax authorities have strict rules in place for transfer pricing. This makes your transfer pricing policy a key element for business compliance. Failing to remain compliant of transfer pricing policies and regulations can result in serious consequences including financial sanctions, heavy fines and/or reputational harm.
Your investment in another country has its own entity – usually a subsidiary or branch of your main HQ. This investment entity needs tools, goods, and services to function, some of which can be supplied by your main HQ at little or no cost (like IT, Finance, or HR). But these services can’t be supplied for free.
Every country has a different tax regime, and implementing and managing your transfer pricing is critical for paying appropriate taxes in the investment locations you operate in. Transfer pricing isn’t based on the prices of your HQ location, but on the prices of services in the country of your investment.