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Year-end transfer pricing adjustments have been and continue to be a widely used mechanism by companies to adhere to their transfer pricing (TP) policies and ensure compliance with local TP pricing regulations. However, albeit widely adopted, this mechanism poses various operational and tax challenges, from direct and indirect taxes to management accounting and reporting.  

Finding the right balance in terms of process and methodology for determining and implementing periodic and year-end adjustments is subject to debate. 

In this Tax Insight, we explore some of the common challenges encountered by businesses in implementing and defending such adjustments, as well as practical considerations for determining an optimal framework to effectively implement TP policies.