Can I use the same price for customs and for transfer pricing?
Often, but not because the two rules say the same thing. Customs valuation and transfer pricing use related but distinct standards, and each authority tests the price for a different purpose. They also pull in opposite directions: the tax authority in the importing country has an interest in a lower price, the customs authority in a higher one. So a single figure can be defensible for both, and it is defensible only if you have worked out what each set of rules requires of it. The coincidence needs to be demonstrated, not assumed.
We made a year-end transfer-pricing adjustment — do we have to tell customs?
It has to be looked at, because a retroactive transfer-pricing adjustment can require a customs correction. The declared value at import was based on the original price; changing that price after the fact changes the basis on which goods were declared. Whether a correction is needed depends on the direction of the adjustment, the goods and the country of import. The practical failure is booking the true-up as an accounting entry and never revisiting the entries, so the tax file and the import records tell two different stories.
Customs says our import price is too low and the tax authority says too high — who is right?
Both can be, on their own rules, which is why this is a coordination problem rather than an argument to win. The same price is tested by two authorities with opposite incentives. The workable answer is one price supported by one functional analysis, with the reasoning written so it can be handed to either authority without contradiction. What fails is settling with one authority on a rationale you would not repeat to the other, because the settlement you sign in one place becomes evidence in the next enquiry.
Does a retroactive price change affect duty we have already paid?
It can, and that is the exposure people miss. Duty was calculated on the value declared at the time of import. If a transfer-pricing adjustment changes the price for those same goods, the declared basis no longer matches the price in the accounts. Sometimes a correction is required, sometimes the adjustment does not touch the dutiable value, and the answer turns on the mechanism and on the country concerned. Either way it is a question to answer before the adjustment is booked, not afterwards.
Who should sign off intercompany prices before year end, tax or logistics?
Neither alone, which is the point. The price the finance team books is the price the customs broker has been declaring all year, and the two are usually decided by people who never speak. Coordinating the positions before year end prevents one fix from creating another exposure. In practice that means the transfer-pricing method, the invoicing terms and the declared values are reviewed together, once, with one person accountable for the fact that they agree. Doing it after the year closes turns a decision into a correction.
Why do customs and the tax authority disagree about the same invoice?
Because they are asking different questions of it. Customs is concerned with the value of imported goods at the border. Transfer pricing is concerned with whether related parties dealt with each other on terms independent parties would have accepted, tested across the whole result rather than shipment by shipment. Related standards, different tests, and the incentives run the opposite way in each. Understanding that the disagreement is structural rather than a mistake by one of them is what makes the file coherent.
What is the CUP method?
Comparable uncontrolled price. You find the price charged in a comparable transaction between unrelated parties and test your intercompany price against it. It is the most direct of the methods and the most persuasive when it fits, because it compares like with like at the transaction level. Its limit is data: close comparables exist for commodities and standard products, rarely for bespoke services or unique intangibles, which is where the margin-based methods take over. See our transfer pricing work.
Do we need transfer pricing documentation for a small group?
The obligation follows the existence of cross-border transactions with related parties, not the size of the group — which surprises founders with one foreign subsidiary and a management fee. Size affects which report is required: a local file, a master file, a country-by-country report. In Canada the practical trigger is timing, because documentation prepared by the filing due date is what stands between an adjustment and a penalty on top of it. See contemporaneous documentation in Canada.
