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Tax authorities around the world are increasingly seeking additional tools to use in their attempts to tax business profits locally which they consider to be diverted from their jurisdictions. In addition to the implementation of the Organisation for Economic Co-operation and Development (OECD)’s anti Base Erosion and Profit Shifting (BEPS) recommendations, some countries are going further and introducing or proposing additional domestic legislation which is separate from, but interacts closely with, transfer pricing legislation. Fundamentally, these rules mean that if the legal arrangements are not considered to reflect the economic reality or the pricing is not arm’s length, tax authorities can essentially rewrite how the transaction should look and levy tax accordingly.

The impact of this on businesses is that they are having to reach a clear, evidence-based view in respect of these complex and often subjective rules, and in many cases are having to respond to ever more detailed and far-reaching information requests from local tax authorities, looking at the activities and motivation for the business operating model.