Global (and Domestic) Transfer Pricing Strategies

Transfer Pricing has been a hot topic and the biggest tax uncertainty for multinationals for years; somehow, it just keeps getting hotter.

The global trade uncertainty that’s driven by the U.S. administration increase in tariffs for products crossing into the U.S. border is amplifying the need for strategic, transactional transfer pricing. With multinationals transferring products into the U.S., 2025 has become a year of stress and uncertainty. 

While there is no option for multinationals to eliminate or decrease the tariff amounts, there is a lot of opportunity to take a strategic approach in reducing dutiable customs value. The key is to do so in a very strategic and quantifiable way, with economic analyses (mostly transfer pricing, sometimes other approaches) to support the drop in customs value, thus reducing the impact of these increased tariffs. Transfer pricing and now tariffs continue to be a focus area in the international community.

Multinational companies of all sizes – from public companies to middle-market companies to family-owned business – need to take steps to ensure they are in a position of strength in this area. With increased scrutiny on cross border transactions, having a consistent global strategy that reflects the economic substance of the overall business and is compliant with regulations in all countries, goes a long way to stay off the radar of the world’s tax authorities.

Transfer Pricing plus Global Trade, Supply Chain and Tariff Mitigation

In both the global and domestic arenas, it is about planning and compliance. This includes applying transfer pricing alongside considerations unique to each business such as optimal tax efficiencies, streamlined cashflow management, minimizing transfer pricing audit risk, and protecting intellectual property. In the current tax environment, it is more important than ever for taxpayers to take a proactive approach to their global transfer pricing strategy, and make sure they are operating as efficiently as possible. Taxpayers need to be diligent in their compliance, ensuring preparation of robust transfer pricing documentation annually. In addition, the contemporaneous documentation study must align with both the intercompany legal agreements and the substance of the accounting/ financial statements. Taxpayers should also consider following the “substance over form” doctrine while avoiding indefinite accrual of intercompany revenue/expenses.

Transfer Pricing – and other economic analyses – matters more than ever given this year of tariff increases and global trade uncertainty. Tariffs are very much an immediate issue for MNEs, time is literally money when product sits on the border with tariffs increasing, and transfer pricing provides a solution. We take a detailed and transactional approach to company’s transfer pricing and identify and eliminate the “noise” that is often in the product price. This will organically bring down the dutiable customs value and will provide the quantifiable support to Customs and Border Protection (“CBP”) for doing so.

It has never been more important for companies to carefully consider – or reconsider – related-party transactions and proactively plan transfer pricing strategies that best fit the current environment. Remember, transfer pricing is not just about the transfer of products/tangible goods. It is also about accounting for services, intercompany financing, intangible valuation and their license, and cost allocations, among other things.

More and more state tax auditors are getting involved, primarily driven by revenue shortfalls resulting from the COVID-19 pandemic. Transfer pricing also has a seat at the transaction advisory table now, as buyers become more in tune with the risks around uncertain transfer pricing positions. Every international company that is a potential acquisition target should ensure they are transaction ready; this involves understanding the location of their intellectual property and protecting it from other tax authorities via smart transfer pricing strategies that reflect the true economic substance of the business. Once the diligence begins, target companies should feel confident that they have the optimal global strategy in place, and that there is consistency in three key areas: the transfer pricing study, the intercompany legal agreements, and the accounting/financials.

Eight Opportunities and Challenges You Should Discuss with Withum’s Transfer Pricing and Tariff Mitigation Team

Disclaimer: No action should be taken without advice from a member of Withum’s Tax Services Team because tax law changes frequently, which can have a significant impact on this guide and your specific planning possibilities.