BDO Transfer Pricing News

Introduction

The global transfer pricing landscape continues to evolve rapidly as tax authorities, courts and MNE groups respond to heightened economic volatility and increasingly complex cross‑border operating models. This issue of Transfer Pricing News highlights a clear through‑line: jurisdictions are demanding stronger evidence of substance, closer alignment between intercompany arrangements and economic reality, and more defensible documentation at a time when both supply chains and tax frameworks are under strain.

In the EU, the CJEU has delivered long‑awaited clarity on the VAT treatment of intragroup transfer pricing adjustments. The Stellantis decision confirms that year‑end pricing adjustments do not automatically constitute consideration for services unless a reciprocal legal relationship exists. The ruling provides welcome certainty for groups using commercial pricing models while underscoring the need for precise documentation where operational activities intersect with pricing mechanisms.

Luxembourg’s Administrative Tribunal has taken a similarly substance‑driven approach, holding that an undisclosed counter‑guarantee may give rise to a transfer pricing adjustment—but only up to an arm’s length guarantee fee. The tribunal rejected attempts to reallocate full financing returns without evidence that the guarantor performed or controlled the underlying financing function, reinforcing the importance of transparency and functional accuracy in intragroup financial arrangements. Italy’s Supreme Court has likewise addressed the application of transfer pricing rules to intragroup financial transactions, particularly where guarantees are granted without explicit remuneration.

Across the globe, Australia’s tax authorities have significantly updated the guidance on inbound distributors and New Zealand’s Inland Revenue has tightened expectations around transfer pricing documentation. While no new filing obligation has been introduced, updated guidance signals a more assertive enforcement posture, with a strong emphasis on localising functional analyses and ensuring documentation reflects New Zealand‑specific facts, with penalties for inadequate documentation framed as likely, elevating the importance of contemporaneous, tailored support for transfer pricing positions.

These jurisdiction‑specific developments are unfolding against a backdrop of global supply chain disruption that is reshaping transfer pricing considerations for MNE groups—including those operating in or through the United Arab Emirates. Geopolitical tensions, inflationary pressures and logistical constraints have raised fundamental questions about how extraordinary costs, risks and operational responsibilities should be allocated. UAE entities—often structured as regional headquarters, procurement hubs or limited‑risk distributors—are facing increased scrutiny around the treatment of abnormal freight and logistics costs, the accuracy of functional and risk profiles, the reliability of benchmarking analyses, and the justification of reduced margins or losses. The introduction of the UAE corporate tax regime, aligned with OECD standards, further heightens the need for robust documentation, updated intercompany agreements and careful evaluation of potential PE risks arising from workforce displacement and shifting operational control.

Taken together, these developments reflect a clear global trend: tax authorities expect greater transparency, more rigorous evidence of substance, and tighter alignment between intercompany arrangements and the economic realities of disrupted markets. MNE groups should proactively revisit their transfer pricing policies, governance frameworks and documentation to ensure they remain defensible in an environment defined by heightened scrutiny and rapid change.