- Transfer pricing adjustments go beyond income tax: where prices of goods or services are adjusted between related parties, this can directly affect VAT obligations (import VAT or VAT on imported services) and customs duties, depending on how the adjustment alters the consideration paid or payable.
- Compensating price adjustments may change the customs value and added tax value (ATV) of imported goods, potentially increasing or decreasing customs duties and import VAT, while compensating tax-only adjustments generally do not affect transactional VAT outcomes.
- As tax and customs authorities adopt a more integrated audit approach, multinational groups must align transfer pricing policies, VAT treatment, and customs valuation, recognising that compliance requires more than journal entries and may involve additional reporting and analysis.
Source Forvis Mazars
