Taxpayers sometimes report an operating loss at the end of the financial year. The State Revenue Service (SRS) perceives this as a key risk that gives grounds for launching a control measure, particularly for taxpayers within a multinational group, citing the transfer pricing (TP) impact on profitability as the main cause of the loss. This article discusses the idea that losses may have an objective economic justification and other legitimate business strategy reasons, with associated risks materialising in the financial year, as well as looking at ways to offer explanations and dispel the myth that TP is the cause of the taxpayer’s operating loss.

We have written earlier about the State Revenue Service (SRS) pointing out significant errors in transfer pricing (TP) files and focusing on the lack of financial data segmentation, the tested party or its financial data, and the benefit test (i.e. evidence of services). This article explores some other common breaches.

It’s been a while since the Organisation for Economic Co-operation and Development (OECD) drafted its Pillar I report dealing with various issues around the growing economic globalisation and digitalisation. It’s also increasingly difficult to determine countries’ rights to charge corporate income tax on the profits of multinational enterprise groups. While the project is basically geared towards digital business, one of the solutions the OECD offers may simplify transfer pricing (TP) for a particular group of transactions: baseline marketing and distribution activities.