Can I use my transfer pricing study for customs valuation?
Not on its own. The two sets of methods overlap, and a transfer-pricing study is useful material, but they are not the same test and one does not evidence the other. A study written to support an income-tax outcome answers a question about profit outcomes over a period; a customs value is asserted consignment by consignment at the border. So the study can support the customs position only where it has been read against the customs methods and the gap between the two has been explained. That explanation is the document that does the work, and it is usually the one nobody has written.
Why do customs and the tax authority disagree about the same price?
Because the incentives run in opposite directions on the same number. A lower intercompany price reduces the duty payable at the border and, at the same time, moves profit towards the importing company where the income-tax authority is looking. Each authority therefore tests the price from the side that costs you money if you are wrong, and a price set purely to satisfy one of them is, on its face, the price the other will question. Related-party dealings attract scrutiny under both regimes for exactly this reason. The position worth holding is one you can explain to either without changing the story.
What happens to customs duty after a year end transfer pricing adjustment?
A retrospective adjustment changes the figure the goods were bought at after those goods have already been entered. Whether and how that flows through to the customs value depends on the system you are importing into and on what the entries said at the time, which is why the treatment of adjustments is better settled before one is made than after. In practice that means the transfer-pricing calendar and the customs function need to know about each other. An adjustment posted quietly in the closing journals is one the border side of the business finds out about from somebody else.
Does a related party price have to be accepted at the border?
A declared price between related parties is not automatically rejected, but it is not automatically accepted either, and the burden of explaining it sits with the importer. What is being tested is whether the relationship influenced the price. That is answered with evidence about how the price was arrived at, not with an assertion that it follows a group policy. Treat every related-party entry as one you may be asked to justify, and keep the justification with the entry. Assembling it two years later, from people who have since moved roles, is the expensive version of the same exercise.
Who should own the intercompany price, tax or the supply chain team?
Neither alone, which is the real problem. The price is set once and tested twice, so if the supply-chain team sets it for landed-cost reasons while the tax team documents it for income-tax reasons, the group ends up with two rationales for one number and no reconciliation between them. Give one person the job of holding the position as a whole: what the price is, why it is that, how it reads under the customs methods, and how it reads under the transfer-pricing methods. That role is what keeps the documentation consistent, and consistency is most of what survives an examination.
What documents reconcile a customs value with a transfer price?
A reconciliation, not a pile. What is needed is a short document stating the intercompany price, setting out how it was arrived at, reading that basis against the customs methods and against the transfer-pricing methods, and naming the points where the two do not line up and why that is defensible. Around it sits the supporting material: the intragroup agreement, the pricing calculation, the entries as declared, and any adjustment made after the fact. One document that says the same thing to both authorities is worth more than two studies each written as though the other regime did not exist.
Is "fund transfer pricing" the same thing as transfer pricing?
No — and if you came here to calculate FTP, this is not it. Fund transfer pricing is a bank's internal allocation of funding costs and benefits between its own business units, a treasury and asset-liability management discipline used to measure branch or product profitability. Tax transfer pricing is about prices between legally separate related parties across borders, and about which country taxes the resulting profit. The words overlap; the fields do not. See our transfer pricing work.
What is OECD Pillar Two?
A global minimum effective tax for large multinational groups, delivered through top-up taxes rather than a single global rate. Where a group's effective rate in a jurisdiction falls below the agreed minimum, the shortfall is collected — by the parent jurisdiction under the income inclusion rule, by the source jurisdiction under a domestic top-up, or as a backstop by other jurisdictions. Canada has enacted implementing legislation. The compliance burden is data, long before it is tax. See BEPS and Pillar Two.
