Minimize Risk and Maximize Tax Savings by Setting Up a Transfer Pricing Strategy

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Small to Mid-tier Manufacturing Companies Open Door to Increased Risk and Penalties According to Survey Results from Habif, Arogeti & Wynne, LLP

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Habif, Arogeti & Wynne, LLP announced today the results of the Firm’s 2013 Transfer Pricing survey entitled “Transfer Pricing: Not Just A Compliance Headache.” Results found that small and mid-tier manufacturers are failing to set up transfer pricing policies that could save valuable tax dollars and eliminate penalties and risk.

Transfer pricing is a business issue that has been at the forefront of Fortune 500 companies’ minds for years, but now that “going global” is an attainable goal for a company of any size, smaller companies need to take notice. Small to mid-tier manufacturing companies that implement a transfer pricing policy can save thousands of dollars per year through tax planning, and eliminate the risk of thousands of dollars in penalties. The best practice for a company of any size is to develop a transfer pricing policy strategy before you even break ground on global operations.

According to HA&W’s survey results 71.6 percent of small to mid-tier manufacturers don’t have a transfer pricing policy in place for all material inter-company transactions. Why? Companies aren’t accurately educated on the opportunities available by having an established transfer pricing policy and the risks of not having one. A transfer pricing policy can serve as a tax planning vehicle to save you tax dollars each year. However, those multinational companies without a transfer pricing policy risk penalties, payback of backed taxes and professional fees associated with a transfer pricing dispute should one arise.

According to the survey, 12.6 percent of respondents indicated that they spend a significant amount of time on transfer pricing and CFOs are leading that charge. The survey found that 11.8 percent of CFOs spend significant time on transfer pricing, while only 8 percent of CEOs agree.

Transfer pricing is complex and some countries have more stringent transfer pricing regulations than others. In addition, disputes are increasing annually. Only 40.5 percent of all respondents and 58.8 percent of CFO respondents were aware that global taxing authorities are cracking down on businesses’ transfer pricing policies.

“The number of transfer pricing disputes that occur each year is on the rise,” said Robert Verzi, HA&W international tax partner. “Because of the increase in transfer pricing disputes, it is imperative that companies set up an accurate transfer pricing policy that is backed by an economic analysis before ever expanding their company overseas. Companies that fail to implement a solid transfer pricing policy risk increased taxes and penalties.”

With that said, HA&W’s 2013 survey found that countries like China, the United States, Canada and Japan were considered the most difficult to deal with. These countries are actively combating transfer pricing abuse by implementing new, more stringent transfer pricing regulations and establishing transfer pricing teams of specialists to look at transfer prices established with the country.

International companies, and those considering international expansion, need to be aware of the tax saving opportunities and potential risks associated with transfer pricing. It’s recommended that companies of all sizes implement a transfer pricing policy before ever going overseas. Without one you will miss out on valuable tax saving opportunities. By partnering with the right business advisor small to mid-tier manufacturers can effectively minimize their worldwide tax rate and save valuable tax dollars that can be reinvested into their business.

HA&W’s “2013 Transfer Pricing: Not Just A Compliance Headache” survey was completed by 87 small to mid-tier manufacturers with a response rate of 10 percent. The survey was conducted between August 1, 2013 and September 20, 2013 using a third-party survey tool and results were collected anonymously.

Interested in the full report? Download the full report at Or have questions about your transfer pricing strategy? Contact Robert Verzi, international tax partner, at robert.verzi(at)hawcpa(dot)com or 404-898-8486.

About Habif, Arogeti & Wynne, LLP:

Today, the pace at which work gets done is faster than ever before, and when companies manage that pace by surrounding themselves with the right people, sustainable success happens. That’s why the Southeast’s most recognizable businesses continue to select Habif, Arogeti &Wynne, LLP as their accounting, audit, tax, and consulting firm of choice.

Companies looking to increase profitability, streamline processes that improve financial reporting, and reduce the time associated with audits, tax planning and compliance choose HA&W.

Quicker answers, avoiding unforeseen pitfalls, becoming a better business for the long-run; these are just a few of the benefits clients routinely experience when working with HA&W.

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Jean Creech Avent
Habif, Arogeti & Wynne, LLP
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