Many companies affected by the recession have chosen between (i) the continuation of the tried and tested tripartite policy of „creating“ taxable phantom income in countries with relatively limited risk units and (ii) by derogation from this transfer pricing policy (implemented in the years before the recession), at the risk of inviting tax authorities from countries where companies are at limited risk. The different policies of the parties tested presented their limitations and challenges in practice in exceptional circumstances. If we get closer to the extreme objectives (good or bad) of the business spectrum, the ambiguity of the definition of the limited risk entity in transfer pricing becomes significant. A multi-party risk-sharing framework could be consistent with the OECD`s BEPS approach. As outlined in the Action Plan for Base Erosion and Profit Shifting, published on 19 July 2013, the OECD highlights the value added in highly integrated groups and recognises the need for greater transparency to assess and limit possible divisions between where money and investment are made and where MNEs report profits for tax purposes. In order to promote transfer pricing results with reasonable returns achieved when creating a business value, the BEPS initiative proposes that it be necessary to review an entire value chain and verify the functions and risks of each company in the value chain, rather than including two companies in the value chain and determining a profitability benchmark for the company whose functions and risks are more limited than the other. o The marketing of intangible assets such as brand names, customer lists, brands, etc., can be transferred to the operating structures of major producers, which are often described according to their risk profiles and economic characterizations as: (ii) licensed producers; (iii) contract manufacturers; and (iv) toll manufacturers. Although the boundaries between these concepts are sometimes blurred and complex manufacturing profiles are too easy, these concepts, which combine manufacturer risk and functional profiles, are often useful in describing typical transfer pricing problems associated with the manufacturing sector. Below are practical illustrations of these four business structures and associated intercompany transactions. Manufacturing is entering an era of complex transformations, fuelled by changes in globalization and demand, rapid innovation and the emergence of new players in emerging countries. Kaoru Dahm, Richard Sciacca, Juan Sebastian Lleras and Daisuke Hagiwara discuss the key transfer pricing trends and challenges that result from this transformation. SMEs in manufacturing should continue to face the risks associated with uncertainty related to factors such as material prices, government regulations, the political climate, exchange rate fluctuations and consumer demand. In addition, the rapid growth of global markets, technological advances and the consequences of the Great Recession from 2007 to 2009 face many transfer pricing challenges, some of which relate to traditional topics that continue to be discussed in the tax and business world, while others are relatively new topics that increase the level of uncertainty in transfer pricing and corporate governance.
and may require a new look at traditional approaches to transfer pricing.