Best Practices for Transfer Pricing Due Diligence in International Mergers and Acquisitions
Multinational enterprises (MNEs) must carefully evaluate the transfer pricing implications of M&A transactions to ensure they comply with relevant tax laws and regulations and effectively manage potential risks. Transfer pricing due diligence (TPDD) is a critical process that helps MNEs identify and manage transfer pricing risks associated with the target company.
Failure to meet transfer pricing regulations can result in significant tax assessments, penalties, and reputational damage. This article provides practical guidance on best practices for conducting TPDD to help MNEs and their advisors navigate the complex transfer pricing landscape and achieve successful outcomes.
Transfer pricing issues should be addressed during the tax due diligence, which can significantly impact on the target company’s financial and tax liabilities. Therefore, it is important to prioritize transfer pricing owing diligence as an integral part of the overall due diligence process in M&A transactions. In addition, it can help the acquiring company assess potential transfer pricing risks and develop a plan to manage them post-acquisition, maximizing the benefits of the transaction.