Transfer Pricing
Defence in Tax Audits and Disputes
ALS delivers comprehensive technical support when tax authorities examine related-party transactions: from the initial audit response through APA negotiation and international Mutual Agreement Procedures.
What our technical defence covers
We analyse the scope of each request and prepare the response within the deadline, with the economic and financial arguments that justify the transfer pricing policy applied and define the boundaries of the audit.
We prepare valuation reports that support the price applied to the related-party transaction, rebutting the tax authority's position with functional and economic analyses designed to withstand rigorous scrutiny.
We coordinate technical dialogue with the inspectors, present additional economic analyses when valuations are challenged, and manage each procedural step to reduce or eliminate proposed adjustments.
When the inspection report is unacceptable, we assess the available challenge routes — reconsideration, administrative-economic tribunal, judicial review — and coordinate with litigation counsel throughout.
When a transfer pricing adjustment creates double taxation on an international transaction, we initiate the MAP before the relevant competent authorities and manage the full procedure across both jurisdictions.
We negotiate unilateral and bilateral APAs that provide legal certainty over future related-party transactions, eliminating audit risk before any dispute arises.
Technical defence before the tax authority
When a tax authority opens a transfer pricing audit, the quality of the economic and financial analysis underpinning the taxpayer's position is decisive. ALS builds that defence from the outset, combining technical rigour with a procedural strategy coordinated with legal counsel.
Strategic positioning from day one
We assess the request, identify the genuine risk of adjustment and determine which arguments and documentation should be deployed at each stage to contain the scope of the audit.
Economic defence reports
We prepare functional analyses, arm's length studies and expert valuation reports that substantiate the correctness of the pricing applied and are structured to withstand the inspectorate's technical challenge.
Legal and procedural coordination
We work closely with the client's in-house legal team or appointed litigation counsel, providing the economic and financial substance for each submission, appeal, and procedural filing.
MAPs and APAs: preventing and resolving international disputes
Transfer pricing disputes frequently cross national borders and engage multiple tax administrations. ALS has extensive experience managing Mutual Agreement Procedures to eliminate double taxation and negotiating advance pricing agreements that prevent conflict before it arises.
Mutual Agreement Procedures (MAPs)
When a transfer pricing adjustment on an international transaction creates double taxation, the MAP enables the competent authorities of both countries to reach a resolution. We manage the complete procedure: case preparation, technical argumentation, and ongoing coordination with the relevant authorities.
Unilateral and bilateral APAs
An Advance Pricing Agreement provides certainty over the pricing of future related-party transactions for its duration, shielding the taxpayer from audit risk on the transactions covered. We negotiate APAs with the competent tax authority, supported by the technical and economic studies required to substantiate the proposal.
Arbitration and double taxation treaties
Where a MAP fails to reach agreement, certain treaties provide for binding arbitration. We advise on whether this route is viable and coordinate action with representatives in each jurisdiction to ensure the taxpayer does not bear unjustified double taxation.
How we manage transfer pricing audit defence
Initial diagnosis
We analyse the request or opening notice, assess the genuine technical risk and define the response strategy: what to disclose, what to reserve, and which arguments to advance at each stage of the procedure.
Building the defence file
We prepare the economic analyses, expert reports and technical memoranda that substantiate the taxpayer's position, calibrated to the level of scrutiny that each audit action requires.
Dialogue with the inspectorate and procedural management
We attend hearings, coordinate responses to investigative actions and keep the client informed of every strategic decision to be taken throughout the procedure.
Resolution, challenge or agreement
We assess the outcome of the audit and recommend the most appropriate path: accepting the assessment, pursuing an administrative or judicial challenge, or initiating an international MAP to eliminate double taxation.
FAQs
Frequently asked questions on transfer pricing audit defence
What does a tax authority actually examine in a transfer pricing audit?
The inspectorate examines whether transactions between related parties have been priced in accordance with the arm's length principle. It cross-checks the taxpayer's documentation against its own comparables databases, assesses the internal consistency of the functional analysis and evaluates whether the valuation method applied is the most appropriate for the transaction under review. The outcome may be an adjustment to the tax base, with the corresponding interest charges and potential penalties.
How much time do I have to respond to a transfer pricing request?
The standard deadline is between ten and fifteen working days, though a reasoned extension request may be made. How that deadline is managed has direct procedural consequences: a late or incomplete response can be treated as obstruction, aggravate penalties and reduce the room for manoeuvre in later stages. We recommend seeking technical advice as soon as the request is received.
Is it possible to reduce or eliminate the adjustment proposed by the inspectorate?
Yes, and this is one of the central objectives of the technical defence. Negotiation with the inspectorate does not turn on numbers but on the quality of the economic arguments: a functional analysis that justifies the risk profile assumed, an updated comparability study, or an expert valuation establishing the market price can significantly reduce — or eliminate — the initially proposed adjustment.
What is a Mutual Agreement Procedure (MAP) and when should one be initiated?
A MAP is the mechanism provided for in double taxation treaties by which the competent authorities of two countries resolve a valuation conflict that gives rise to taxation in both jurisdictions on the same income. It should be initiated when a transfer pricing adjustment in one jurisdiction is not neutralised by the corresponding correlative adjustment in the other, resulting in effective double taxation. A MAP can run alongside domestic challenge proceedings and does not require waiving appeal rights before the courts.
What are the advantages of negotiating an APA rather than waiting for an audit?
An Advance Pricing Agreement eliminates uncertainty about the pricing of future related-party transactions for its duration, typically three to four years. With an APA in place, the taxpayer has the assurance that the tax authority cannot challenge the agreed pricing methodology as long as the agreed conditions are met. This allows intra-group transactions to be structured with full legal certainty and removes the litigation cost associated with a future audit.
How long can a transfer pricing inspection last, and what happens if it is prolonged?
The maximum period for an inspection procedure is eighteen months, extendable to twenty-seven in cases of particular complexity or where specific circumstances justify the extension. Transfer pricing procedures are inherently complex and frequently run to or beyond the ordinary time limits. Throughout that period, the taxpayer retains the right to submit additional documentation and arguments, and may request that the inspectorate disclose the criteria it is applying so that they can be countered with the necessary technical rigour.
ALS Transfer Pricing
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