TRANSFER PRICING
Navigate a complex tax environment with confidence.
Because behind every international transaction, there are strategic choices that shape the future of your company.
In a business world where international trade is the norm, transfer pricing is a major strategic issue for any company with foreign affiliates. These are the prices set for intra-group transactions, i.e. sales of goods, services or financing between different companies belonging to the same group.
The aim is to determine prices that are both fair and compliant with international rules, as if they were transactions between independent companies. This practice therefore requires not only great rigor and strategic vision, but also a good understanding of the tax requirements specific to each country.
In other words, good transfer pricing is not just a tax obligation. It is also a means of reducing the risk of disputes with tax authorities, reinforcing the company’s credibility on a global scale, and ensuring a fair distribution of profits between the different entities of the group.
OUR INTERNATIONAL TAX SERVICES
A constantly changing regulatory environment
Tax authorities in Canada and elsewhere are stepping up their transfer pricing controls and demanding ever more detailed documentation. Compliance has thus become more demanding than ever for multinational companies.
In this context, it is essential for an organization to:
- Comply with international and local regulations, to demonstrate that prices charged between subsidiaries are fair and comply with fiscal standards;
- Maintain solid, irreproachable documentation that clearly explains the economic and financial rationale behind intra-group transactions;
- Anticipate and manage the exchange of information between jurisdictions, as tax authorities increasingly collaborate and share data;
- Minimize the risk of litigation and penalties by adopting a proactive, transparent approach.
Our tax experts, your strategic allies
At Demers Beaulne, we use our international tax expertise to:
- Structure your intra-group transactions in line with best practice and applicable tax requirements
- Develop customized strategies aligned with your business objectives
- Optimize your financial flows while reducing your tax risks
- Represent your interests before the Canadian tax authorities Canada and elsewhere to facilitate your audits
Global reach, human support
As a member of the Moore Globalnetwork, we have access to international know-how and resources, which we mobilize to provide you with comprehensive support, wherever your business may be. We combine our technical expertise with an in-depth understanding of your business issues, to offer you concrete, sustainable solutions tailored to your reality.
Frequently Asked Questions
What is transfer pricing? (definition, method, documentation)
Transfer prices represent the monetary value attributed to transactions between companies of the same group located in different countries. For example, when a company in Canada sells products to its subsidiary in France, the amount invoiced constitutes a transfer price.
These prices follow the arm’s length principle, meaning that they must correspond to the rates charged between independent companies. OECD-recognized methods are used to establish these prices, such as comparison with similar transactions on the market or analysis of profit margins.
The required documentation includes a detailed analysis of each entity’s functions, the risks assumed and the assets used. Companies must justify their methodological choices and demonstrate that their prices comply with international standards.
What is the acceptable transfer price, according to the OECD’s preliminary agreements?
TheOrganisation for Economic Co-operation and Development establishes precise criteria for validating amounts invoiced between affiliated companies. A tariff becomes acceptable when it reflects the economic reality of exchanges and the added value created by each entity.
Profit margin is a key indicator: it must correspond to market standards for similar activities. For example, a manufacturing subsidiary in Canada selling to its parent company in France will apply a margin comparable to that of other local manufacturers.
Advance pricing agreements (or arrangements) enable multinational groups to obtain early validation of their pricing policies from the relevant tax authorities. This proactive approach considerably reduces the risk of subsequent challenges.
What is a transfer value?
The transfer value is the actual amount attributed to exchanges between affiliated companies, after a full analysis of economic factors. This valuation takes into account the assets used, the risks assumed and the functions performed by each entity.
The calculation is based on specific methods such as cost-plus analysis or comparison with similar transactions on the market. Companies must rigorously document their methodology to justify the amounts retained.
Tax experts recommend a structured approach based on :
- Detailed study of financial flows between entities
- Comparative analysis of market data
- Comprehensive documentation of methodological choices
Our Experts
Our Experts, your Allies
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PartnerJean-Philippe Binette -
PartnerMarie-Claude Péthel -
DirectorMélanie Arseneault -
PartnerGerry De Luca
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