Customs value vs transfer price — where does doing it myself start to cost money?
Some of it, yes — and we will say so on the call if that is the honest answer. The parts that are worth paying for are the ones where a missed election, a missed deadline or an unverified threshold costs more than the fee: customs valuation rules and transfer-pricing rules use related but distinct standards, and a retroactive transfer-pricing adjustment can require a customs correction.
What if I have already filed and got it wrong?
That is a common starting point. We re-derive the position, identify whether an amendment or a disclosure route is the right vehicle, and tell you which one preserves the relief that is still available. The order matters more than the speed.
How long will it take?
It depends on the documents rather than on us. Once the pack is complete most filings turn around inside a fortnight; anything that needs a certificate from a tax authority runs on that authority's timetable, which we tell you at the start rather than at the end.
Can a transfer-pricing adjustment change the customs value we declared?
It can, and this is where groups are most often caught out. A retroactive adjustment restates what the importer actually paid for goods that have already cleared, and the declared value was based on the original price. Where the adjustment raises the price, there is generally additional duty to account for; where it lowers it, there may be duty to reclaim, but only if the correction is made through the customs procedure rather than assumed. The tax entry and the customs entry are separate acts. Booking the first and not making the second leaves a declared value that the group's own accounts contradict.
Customs says our import price is too low and tax says too high — who is right?
Both are applying their own rules to the same number, and the rules are related but not identical. The customs authority is testing whether the relationship between the parties influenced the price for valuation purposes; the tax authority is testing whether the price gives the local entity an arm's length return. The incentives run in opposite directions, so the price that satisfies one is the price the other queries. The position that survives is one price, set on a basis you can explain to both, with the differences between the two standards written down rather than discovered at an audit.
Does a transfer-pricing study prove our import price to customs?
It helps, but it rarely answers the question on its own, and groups routinely overestimate how far it goes. A study usually tests an entity's overall operating margin across a whole class of transactions; a customs authority is examining the value of particular goods on particular entries. If the tested party, the transactions covered and the period do not line up with the imports in question, the study is evidence about something adjacent rather than about the declared value. Where both authorities are likely to ask, it is worth building the file so that it addresses the import transactions directly.
Do we have to tell customs about a year-end true-up?
Assume the answer is yes and work out the mechanism in advance, rather than deciding after the adjustment is booked. A true-up changes the price paid for goods already imported, which is the figure the declaration was based on. Most customs regimes have a route for correcting a declared value, and most of them have conditions about when and how it is used. The practical difficulty is that the adjustment is usually calculated in aggregate at group level while the declarations were made entry by entry, so the allocation back to entries has to be worked out.
If our intercompany price goes up, do we owe more duty?
Where duty is charged on value, a higher price for goods already imported generally means more duty on those imports, which is why an adjustment that improves one position can worsen the other. That is the trade-off to quantify before the adjustment is made, not after. The cost of an upward adjustment is the tax it settles in the importing country less the duty and import taxes it triggers; the same calculation in reverse applies to a downward adjustment, where overpaid duty may be reclaimable only if it is claimed properly and within the customs regime's own limits.
Who should set the intercompany price, the tax team or the customs team?
Neither in isolation, which is the usual root of the problem. In most groups the transfer price is set by a finance or tax function against a margin target, and the value declared on import is handled by a logistics function or a broker working from the invoice, with no conversation between them until something goes wrong. One price file, prepared with both standards in view and available to both functions, is the fix. It costs far less to coordinate the two positions before the year closes than to correct one of them after the other has been examined.
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.
What is the arm's length principle?
The standard that a transaction between related parties should be priced as it would have been between independent ones dealing at arm's length. It is the test every major transfer pricing regime applies, and it is evidenced by comparison — finding independent transactions or companies genuinely similar in function, risk and assets, then showing your pricing falls within the range they produce. That comparison is what a benchmarking study documents. See benchmarking study.
