Tax laws are incredibly complicated – especially when it comes to international tax laws. Navigating these matters takes considerable financial knowledge as well as legal acumen.
Because of how complex these cases are, they can take a long time to resolve. Rarely are issues like transfer pricing disputes tackled overnight. However, companies worldwide are pushing for changes that would move these types of conflicts along faster.
The need for change
Operating a business internationally can be both lucrative and frustrating. You expand your brand and potential for profit, but you must also navigate the tax and operational nuances of cross-border dealings.
Right now, this landscape is full of obstacles that make it more difficult than it probably needs to be to resolve transfer pricing disputes. As this article explains, the current system is becoming overwhelmed by cases as people become savvier about transfer pricing matters and governments are more closely scrutinizing tax adjustments.
These components have led to an increase in transfer pricing disputes; in 2019, more cases were opened than were closed. This increase has costly created delays in the dispute resolution process. Thus, parties around the world want to see improvements to decrease the time it takes to resolve transfer pricing disputes.
Improving the mutual agreement procedure
The mutual agreement procedure (MAP) is one option that parties can utilize to resolve disputes together. Currently, it takes about 30 months for parties to close a transfer pricing dispute through MAP. Compare this to the 22 months on average it takes to resolve other conflicts, and it becomes clear that there is room for improvement.
Reducing caseload and making the process more efficient can help move a case forward more quickly. However, there is no clear plan for how to make this happen, and organizations like the Organization for Economic Cooperation and Development (OECD) are currently seeking feedback to streamline the MAP process.
Protecting your business and your case
It will be interesting to see if parties make advancements to the MAP process in the near future. In the meantime, Canadian business owners can take steps to protect themselves and their company from the pitfalls of a lengthy transfer pricing dispute.
Working with a lawyer, evaluating issues before setting a transfer price and evaluating similar cases are some of the ways to accomplish this.