Are Transfer Pricing Policies fit for purpose as business models evolve?
Cross‑border intra‑group transactions have a material impact on the financial outcomes and tax obligations of Multinational Enterprises (MNEs).
Transfer pricing rules continue to undergo substantial changes and tax authorities have intensified their scrutiny, leveraging AI‑driven tools, resulting in substantial assessments and foreign tax adjustments.
The adoption of artificial intelligence across industries is transforming the business models, while the introduction of Public Country‑by‑Country Reporting adds a new level of scrutiny. At the same time, in light of the current global trade environment, many MNEs are reevaluating where they manufacture, hold intellectual property and distribute products to foreign markets as well as how they structure their intra-group services and how they support the benefit test.
The start of 2026 has already introduced further developments with the OECD issuing new Administrative Guidance on Pillar Two, introducing the Side‑by‑Side Safe Harbour (with the United States as the first qualifying jurisdiction), alongside a Simplified Effective Tax Rate Safe Harbour and a Substance‑Based Tax Incentive Safe Harbour, all of which are central to the interactions between OECD rules, the EU Minimum Tax Directive, and Member States’ incentive regimes as implementation and compliance frameworks continue to evolve.
These changes present both challenges and opportunities and the question emerges: what should MNEs do to ensure their transfer pricing policies remain accurate, relevant, and compliant?
MNEs should establish a robust transfer pricing (TP) strategy
MNEs must reevaluate whether their TP strategy is fit for purpose and aligns with where value is created globally within the group; they must ensure that their TP Policy is robust and evolves in line with business and regulatory developments. TP policies should be formalized through well‑drafted intercompany agreements, and TP Documentation must be prepared in accordance with the specific requirements of each jurisdiction.
A well‑structured and clearly articulated TP policy reduces the risk of disputes and controversy, provides a defensible position during tax authority challenges, and ensures alignment between policy, operational reality, and financial reporting.
MNEs should support their transfer pricing with data and technology
Tax authorities are now looking beyond TP policy language, they are examining how transfer prices are calculated, how they reconcile with financial results, and how closely intercompany agreements align with actual facts.
In this environment, MNEs should strengthen their approach by leveraging technology for automated data collection, use AI to enhance efficiency, accuracy, and consistency, use cloud‑based platforms to enable real‑time data access, scenario modelling, forecasting, and streamlined compliance and analytics systems to compute transfer prices and identify risk areas.
MNEs should stay informed and be ready to respond to change
MNEs must continuously monitor global and local transfer pricing developments including trends in disputes raised by tax authorities, proactively identifying audit risks, making use of Advance Pricing Agreements (APAs) where transactions are significant and of high‑risk and consistently being prepared to defend their TP policy effectively during tax audits.
In a world of accelerating regulatory change and global supply chain transformation, MNEs must ensure their transfer pricing framework is robust, data‑driven and aligned with where value is truly created.
