Whilst ESG initiatives become increasingly commonplace, the associated transfer pricing considerations can often lag behind. This can have significant implications on a company's global transfer pricing position and expose corporates to significant financial exposures and tax liabilities.
Key takeouts
- Transitioning to more ESG-aligned businesses processes can create transfer pricing challenges, particularly in determining the cost and value of implementing sustainable practices
- Robust documentation and clear transfer pricing policies are key to avoiding potential disputes with tax authorities, quantifying benefits to stakeholders and demonstrating the 'arm's length' value of sustainable investments.
- To proactively manage any future transfer pricing review, corporates should document and evidence their transfer pricing position and work collaboratively with tax authorities to ensure they meet any evolving review requirements.