2005-2006 global transfer pricing surveys - temple …rmudambi/teaching/ba804/f-f_10/ey_glob...4...

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IN T E R NAT I O NA L TA X

SE RV I C E S

2005-2006 Global TransferPricing SurveysGlobal Transfer Pricing Trends, Practices, and Analysis, November 2005

TR A N S F E R PR I C I N G SU RV E Y S 2005-2006

1

Since 1995, Ernst & Young has surveyed multina-

tional companies (MNEs) on international tax mat-

ters, with special emphasis on what continues to be

the number one international tax issue of interest to

them – transfer pricing. The scope of our biennial

transfer pricing research reflects the growth in the

number of countries that now focus more attention

on transfer pricing activity, the increase in the

number of countries introducing documentation

requirements and penalty rules, and the diversity of

transfer pricing issues facing MNEs. In this 10th

anniversary report, we have given our Survey a new

look and will release Survey results in three install-

ments, followed by a technical commentary on cur-

rent and emerging issues in 2006.

In the first installment, we conducted Web-based

Surveys of over 100 global financial institutions.

These financial institutions are increasingly

concerned about transfer pricing risk driven by chal-

lenges of various tax administrations to their transfer

pricing policies. Copies of this first installment can

be found at www.ey.com/transferpricingsurvey.

For this second installment, Ernst & Young

commissioned Concensus Research International

to conduct independent interviews in 2005 with 348

parent companies and 128 subsidiary corporations

in 22 countries.

Ernst & Young’s third survey installment, Tax

Authority Interviews: Perspectives, Interpretations,

and Most Important Regulatory Changes, will be

issued in Quarter 1, 2006.

Finally, our fourth wave, Transfer Pricing Regional

and Industry Trends, Practices, and Analysis,

Quarter 2, 2006, will delve more deeply into the

issues addressed in this survey report.

We trust that you will find our 2005-2006 Survey

results interesting and informative.

Ernst & Young Transfer Pricing Surveys

11999977AustraliaCanadaFranceGermanyItalyJapanKoreaNetherlandsSwedenSwitzerlandUKUSA

11999999Argentina AustraliaBrazil CanadaDenmarkFinlandFranceGermanyItalyJapanKoreaMexicoNetherlandsNorwaySpainSwedenSwitzerlandUKUSA

22000011Argentina AustraliaBelgium Brazil CanadaDenmarkFinlandFranceGermanyIrelandItalyJapanKoreaMexicoNetherlandsNew ZealandNorwaySpainSwedenSwitzerlandUKUSA



Table 1Countries Surveyed in Parent Study

2TR A N S F E R PR I C I N G SU RV E Y S 2005-2006

Table 2: Countries Surveyed in Subsidiary (Inbound) Study11999977 11999999 22000011 22000033 22000055

France Canada Argentina Argentina Argentina

Germany France Australia Australia Australia

Netherlands Germany Canada Canada Canada

UK Mexico France France France

USA Netherlands Germany Germany Germany

UK Italy Italy Italy

USA Netherlands Japan Japan

Mexico Netherlands Mexico

Netherlands Mexico New Zealand

New Zealand New Zealand UK

UK UK USA

USA USA

Venezuela

3

EExxeeccuuttiivvee SSuummmmaarryy ..................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................44

22000055 KKeeyy GGlloobbaall FFiinnddiinnggss ....................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................55

RReegguullaattoorryy DDeevveellooppmmeennttss RReeiinnffoorrccee tthhee IImmppoorrttaannccee ooff TTrraannssffeerr PPrriicciinngg ..............................................................................................................................................................................................................................................................................................................66

RRiisskk ooff TTrraannssffeerr PPrriicciinngg AAuuddiittss aanndd AAddjjuussttmmeennttss RReemmaaiinnss HHiigghh............................................................................................................................................................................................................................................................................................................................................................88

Audit Triggers ....................................................................................................................................................................................................................................................................................8

TTrraannssffeerr PPrriicciinngg DDooccuummeennttaattiioonn PPrraaccttiicceess ............................................................................................................................................................................................................................................................................................................................................................................................................................................................1100

IInnccrreeaassiinngg TTrraannss--BBoorrddeerr IInnvveessttmmeenntt aanndd TTrraaddee LLeeaadd ttoo TTrraannssffeerr PPrriicciinngg CCoommpplleexxiittiieess....................................................................................................................................................................................................................................1122

New Frontiers: Investment in Asia Raises New Tax Issues that are Being Addressed in Different Ways ............................................................................................................................................................................................................................................12

Other Changes to Supply Chains ..................................................................................................................................................................................................................................13

TTrraannssffeerr PPrriicciinngg DDoommiinnaatteess tthhee AAggeennddaa ........................................................................................................................................................................................................................................................................................................................................................................................................................................................................1144

Most Important Issue in the Next Two Years.........................................................................................................................................................................................................14

The Role of the Tax Function..............................................................................................................................................................................................................................................15

Transfer Pricing Profile in the Organization............................................................................................................................................................................................................15

RReeggiioonnaall IInnssiigghhttss ........................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................1166

Examinations...................................................................................................................................................................................................................................................................................16

Compliance ......................................................................................................................................................................................................................................................................................17

Planning...............................................................................................................................................................................................................................................................................................18

MMeetthhooddoollooggyy..............................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................1199

EErrnnsstt && YYoouunngg’’ss GGlloobbaall TTrraannssffeerr PPrriicciinngg aanndd TTaaxx EEffffeeccttiivvee SSuuppppllyy CChhaaiinn MMaannaaggeemmeenntt PPrraaccttiiccee CCoouunnttrryy CCoonnttaaccttss................................................................................................2200

Contents


Ernst & Young’s 2005 Transfer Pricing Survey

results clearly indicate that transfer pricing contin-

ues to be a priority tax issue—in many cases,

transfer pricing is THE priority tax issue—for

governments and multinational enterprises (MNEs)

around the world.

The 2005 Survey responses strongly reaffirmed

previous Survey findings that transfer pricing is

the dominant tax issue facing MNEs. This impor-

tance appears to be driven by two primary

factors—increasing compliance demands accom-

panied by tax authority reviews and adjustments

and business change.

In the two years since our 2003 Survey, more fiscal

authorities have taken action on transfer pricing.

More countries are introducing or revising tax laws

governing transfer pricing, including documenta-

tion requirements and/or enacting penalties for

transfer pricing adjustments and are using transfer

pricing audits to enforce their laws. Many respon-

dents to our 2003 Survey expressed concern that

they were likely to face transfer pricing audits in the

near future. These fears have proven to be well-

founded. Audits are being carried out with regular-

ity, and a high percentage of completed audits are

still leading to transfer pricing adjustments.

Corporations seem to prefer traditional transac-

tional transfer pricing methods over the profits-

based methods used by many tax administrations on

audit. While only a minority of MNEs use advance

pricing arrangements or resort to competent author-

ity relief, substantially all who have done so would

do so again in the future.

New trends have also emerged in the 2005 Survey.

More than 70% of parent company respondents

reported significant changes in their business opera-

tions during the last three years whether through

business expansion, by merger or acquisition, or by

redeployment of resources with most respondents

reporting changes in more than one of these areas.

Multinationals reported new investment in this

period in Mexico, Eastern Europe, and Asia, notably

in India and China. Looking ahead, we expect these

shifts in investment will present new transfer pricing

challenges—both in the new investment territories

and in the former operating jurisdictions.

Corporate profits continue to be heavily taxed. This

tax burden is accompanied by increasing regulation

and enforcement to maintain the tax base in the

world’s largest economies. At the same time, MNEs

are constantly changing the type and the scope of

their operations around the world. Globalization is

expanding the number and type of cross-border

intercompany transactions, thereby increasing the

compliance burden for MNEs.

These changes have had two major effects on the

companies participating in our 2005 Survey: the

relative importance of international tax planning has

increased from our previous Survey levels; and tax

functions are becoming involved earlier in the busi-

ness planning cycle than previously.

The following report highlights key findings, pro-

vides background on recent regulatory developments

and outlines the findings on the continuing impor-

tance of transfer pricing to MNEs. The report pro-

vides insights into how the tax departments of

multinational enterprises are dealing with these

changes in the economic, regulatory, and fiscal envi-

ronments in which their companies operate.

Executive Summary

5

Table 3Countries That Have Effective Documentation Rules11999944--11999977 11999988--22000011 22000022--22000033 22000044--22000055 DDooccuummeennttaattiioonn RRuulleess EExxppeecctteedd SSoooonnUSA USA USA USA ChileAustralia Australia Australia Australia ChinaFrance France France France Finland Mexico Mexico Mexico Mexico IrelandBrazil Brazil Brazil Brazil IsraelNew Zealand New Zealand New Zealand New Zealand Russia

Canada Canada Canada SwedenSouth Korea South Korea South KoreaArgentina Argentina ArgentinaUnited Kingdom United Kingdom United KingdomDenmark Denmark DenmarkVenezuela Venezuela VenezuelaSouth Africa South Africa South AfricaGermany Germany GermanyBelgium Belgium BelgiumJapan Japan JapanPoland Poland PolandKazakhstan Kazakhstan KazakhstanIndia India IndiaPortugal Portugal Portugal

Argentina ArgentinaColumbia ColumbiaNetherlands NetherlandsThailand ThailandMalaysia Malaysia

IndonesiaNorwaySpainPeruTaiwanHungaryEcuador

2005 Key Global FindingsMore than 90% of all Survey respondents find transferpricing important; transfer pricing is identified morethan any other concern as the most important item onthe agenda of their corporate tax directors.

Thirty-one percent of all respondents believe thattransfer pricing will be absolutely critical to their orga-nizations over the next two years.

Almost 70% of respondents believe transfer pricingdocumentation is more important today than it wastwo years ago.

Sixty-three percent of all respondents have under-gone a transfer pricing audit in the last three years;over 40% of these examinations have resulted inadjustments by the tax authorities.

Many companies have expanded their internalresources dedicated to transfer pricing and tax riskmanagement, increasing their average headcount by 1 full-time equivalent to 2.5.

Seventy-two percent of parent companies reportedsignificant international business changes over thepast two to three years.

Thirty-four percent of parent company respondentsindicated that they had used business changes morefrequently than in the past to implement transfer pric-ing or tax planning strategies.

Tax Directors are involved in business planning andrestructuring initiatives at an earlier stage than wasthe case two years ago.

2005 Key Global Findings


In a continuing attempt to obtain their “fair share”of MNEs’ taxable income, more governments areaddressing transfer pricing on a more formal basis.This is evident in the outpouring of new or updatedtransfer pricing legislation, including penalty provi-sions for inadequate documentation or unsupportedtransfer pricing, and in increased regulations andother guidance. Table 3 shows, at a glance, thegrowing list of countries that have promulgatedtransfer pricing documentation rules. Further infor-mation on this topic is available in our GlobalTransfer Pricing Reference Guide atwww.ey.com/transferpricingreferenceguide.

Thirty countries account for 75% of global GDP,and the majority of trade and investment occursthrough these countries. The ways in which, and theextent to which, these governments raise moneythrough taxation continue to vary widely.Additionally, corporate tax rates have been chang-ing. For instance, in the European Union (EU) theaverage corporate tax rate has declined from 38.2%in 1996 to 30.1% in 2005. However, tax revenues asa percentage of GDP within the EU have remainedstable, perhaps indicating both the attractiveness oflower rates but also increased tax enforcement.1

Finally, relative changes in tax rates between coun-tries (what some refer to as “tax competition”) also

play a role in the changing landscape of corporatetaxation, as this has made some economies moreattractive than others for inbound investment.

To maintain their tax and investment bases in theface of tax competition and mobile capital, certaintax authorities have responded with more compre-hensive legislation and enforcement of tax rules gov-erning related-party transactions. Virtually all majoreconomies now have some form of transfer pricinglaws, many including documentation or penalty pro-visions. As shown in Table 3 and Table 4, the numberof countries imposing transfer pricing compliancerequirements continues to grow and countries con-tinue to modify their rules or practices.

Although most jurisdictions follow the arm’s lengthprinciple in regulating transfer prices, tax authoritiesapply this principle in different ways. Multinationalsare “caught in the middle” while authorities argueover where the profits of an enterprise should besubject to taxation. These dynamics add to the com-plexity of effective transfer pricing policy manage-ment and controversy avoidance, especially whencoupled with the prevailing attitude held by manytax authorities that MNEs use transfer pricingschemes to avoid taxation. More than ever, MNEsmust “think globally and act locally” when it comesto their transfer pricing policies.

1 Source: The Cato Institute, OECD, and the European Commission.

Regulatory Developments Reinforce the Importance of Transfer Pricing

7

AAmmeerriiccaass

The United States IRS published pro-posed regulations on services (August2003) and on cost-sharing agreements(August 2005);

The United States Sarbanes-OxleyCorporate Accountability Act of 2002 hasincreased the level of scrutiny with whichintercompany dealings are examined, withthe introduction of Circular 230;

Mexico announced implementation of ahierarchical approach to transfer pricingmethods in response to the OECD’sreview of its transfer pricing practices(2005);

Canada formed a transfer pricing reviewcommittee (2004) and since its forma-tion has imposed penalties in over one-half of the cases it has reviewed;

Canada and the United States issued ajoint memorandum of understanding withrespect to transfer pricing matters thatwere at issue between their respectivetax administrations and complicating thecompetent authority process betweenthem (2005).

Table 4 Transfer Pricing DevelopmentsExamples on recent and anticipated legislation and regulatory and administrative developments since our last Survey include the following:

AAssiiaa PPaacciiffiicc

Japan announced that it would allow useof the transactional net margin method(2005);

The Pacific Association of TaxAdministrations released guidance onmutual agreement (competent authority)procedures amongst its four memberstates (Australia, Canada, Japan, and theUnited States) (2004);

China’s tax authority (the SAT) issued aprivate ruling letter in 2004 endorsing theconcept of an international R&D CostSharing Arrangement for foreign invest-ment enterprises;

China is expected to announce documen-tation requirements by the end of 2005.

EEuurrooppee

The United Kingdom integrated its thincapitalization and transfer pricing rulesand issued anti-avoidance arbitrage rules (2004);

The EU Joint Transfer Pricing Forumreleased its report on documentationrequirements;

EU initiatives to harmonize documenta-tion requirements and APA/arbitrationprocedures in the EU member states(2004-2005);

The UK and Denmark have expanded theirtransfer pricing documentation require-ments to also include transactionsbetween domestic legal entities in ordernot to discriminate companies in otherEU states (2004-2005);

A number of landmark decisions in theEuropean Court of Justice with strongimpact on local country tax and transferpricing legislation (2004-2005).

OOrrggaanniissaattiioonn ffoorr EEccoonnoommiicc OOppeerraattiioonn aannddDDeevveellooppmmeenntt ((OOEECCDD))

OECD released draft guidelines relating to global trading and permanentestablishments (2005);

The OECD is currently completing itsreview of the availability and use of comparable data;

The OECD is reviewing how the competentauthority provisions of tax treaties arebeing used;

The OECD is reviewing its treatment ofintangibles;

The OECD is reviewing its guidance onthin capitalization.


The 2005 Global Survey found evidence of an

increasing level of audit activity, as 65% of parent

companies and 59% of subsidiaries responded that

they have experienced an examination of their trans-

fer prices since 2001. This percentage is signifi-

cantly higher than reported in any of our last four

Surveys. Of those audits with known outcomes,

44% of parent and 34% of subsidiary examinations

resulted in adjustments. The majority of respon-

dents indicated that their audits were triggered by a

combination of business and tax developments.

In previous Surveys, we noted tax authority signals

that they were increasing resources to enforce their

transfer pricing rules. It is also consistent with

recent other indications of increased audit activity.

In the U.S. for example, the IRS instructed examin-

ers in January 2003 to request transfer pricing doc-

umentation for large audits, to enforce the 30-day

period allowed for taxpayers to comply with this

request, and to enforce the substantial and gross

misstatement penalties. In the subsequent fiscal

year (2004), collection of corporate taxes by the

U.S. government climbed nearly 44%, to $189.4

billion, including a rise in enforcement

collections by 10%2.

Audit TriggersWhen we asked our parent company Survey respon-

dents to tell us what circumstances they believe will

trigger audits, they identified various risk factors

based on their recent interactions with tax authori-

ties (see Table 5). Notably, most respondents believe

that “increased audit and enforcement targets by tax

authorities” will

explain the increased

transfer pricing audit

activity in the coming

years, with “changes

in income” and “trans-

action size” close

behind. It is signifi-

cant that the factors

leading to an audit

have increased in

number and in impor-

tance from previous

surveys.

Risk of Transfer Pricing Audits and Adjustments Remains High

The majority of respondents (65% of parentsand 59% of subsidiaries) have had their

transfer pricing documentation examinedsince 2001, and 44% and34% of known out-comes, respectively, involved an adjustment.

The majority of companies surveyed (82% ofparents and 78% of subsidiaries) believe an

audit of their transfer pricing policies is likelywithin the next two years.

80%

70%

60%

50%

40%

30%

20%

10%

0% Increase inaudit andenforce-ment tar-

gets by fiscal

authorities

Change intransferprices

Significantmonetaryvolume oftransac-

tions

Changes in taxable

income ofthe audited

entity

Recordedlosses

Newlegislation

RestructureD opera-

tions

Complexityof

transac-tions

Other Don’tknow/not

stated

Table 5Circumstances Most Likely to Trigger Transfer Pricing Audits(Parent Companies)

2 Source: IRS, Bloomberg, Wall Street Journal, and Tax Executives Institute.

Multiple responses permitted.

9

Following an audit, 64% of parents and 71% of

subsidiaries changed their documentation practices,

generally increasing the level of detail in their docu-

mentation (approximately 35%) either making it

more local or increasing the transactional or support-

ing analytical detail. Twenty-five percent of parent

companies and 32% of subsidiaries reported that they

had to prepare documentation as a result of the

audits. Other notable changes included improved

documentation preparation and management

processes and more timely preparation and support.

Transfer pricing audits appear to have become more

detailed as more respondents report a number of

types of transactions coming under review (Table 6).

Generally speaking, as tax authorities become more

experienced, they seek to review more complex

transactions moving from services transactions to

tangible goods, royalties, and cost-sharing agree-

ments to financing transactions. Recent develop-

ments, including the legislation in Europe

addressing thin capitalization, the United Kingdom’s

arbitrage rules, and the United States’ global deal-

ing, and proposed cost-sharing and services rules

suggest further scrutiny of more complex transac-

tions is on the horizon.

Table 6Types of Transactions Under Review

Percent of Audits Involving the Following Transactions (Parent Companies)

22000055 22000033 22000011Sales of tangible goods 53 37 40Services 49 29 26Intangibles (including royalties) 28 14 10Intercompany financing 20 9 9Technology cost sharing agreements 14 5 3Multiple responses permitted

Companies were also asked to identify the countries

where audits had arisen and the results of audits.

Since the 2003 Survey, there has been a

significant increase in audits in the industrialized

countries as shown in Table 7 which includes data

on the known outcomes of audits in these countries:

Table 7Known Outcomes of Audits

PPeerrcceenntt ooff PPaarreennttss PPeerrcceenntt ooff AAuuddiittssRReeppoorrttiinngg AAuuddiittss RReessuullttiinngg iinniinn tthhee CCoouunnttrryy AAddjjuussttmmeenntt22000055 22000033 22000055 22000033

Germany 38 26 53 41United States 37 30 38 40United Kingdom 36 26 43 33France 32 19 35 25Canada 28 12 81 45

The implications are clear that the risk of adjust-

ment on a transfer pricing audit is high. Parent com-

panies reported that they used advance pricing

arrangements (APAs) and competent authority

referrals to mitigate the effects of transfer pricing

adjustments. As in prior Surveys, respondents were

asked for their experience with APAs and the com-

petent authority process as dispute resolution tools.

APAs can be used in advance of audits to resolve

potential issues, and competent authority is pro-

vided under the mutual agreement procedure of

international tax treaties.

The 2005 Survey reports a significant increase in the

attractiveness of APAs as 31% of parent company

respondents indicate that APAs are an important risk

management tool. Twenty-three percent of parent

companies have used APAs (14% in 2003), primarily

in the United States (38% of APAs), Australia and

the U.K. (19% each), and Canada (16%). Eighty-

four percent of those using APAs would do so again.

Eighteen percent of parent companies resorted to

competent authority, primarily in the U.S. (39% of

cases) and Canada (33%). Of those using the compe-

tent authority process, 57% reported they would do

so again, while 18% reported they would use APAs

to resolve the matter at issue.

The first line of defense in a transfer pricing audit

consists of the MNE’s transfer pricing documenta-

tion. Seventy percent of all respondents indicated

that transfer pricing documentation is more impor-

tant than it was two years ago. Many jurisdictions

require that transfer pricing documentation be pre-

pared often within specified time lines, generally on

or before the due date for tax returns. Even so, less

than half of all respondents indicate that they prepare

their documentation before the tax returns are filed.

Approximately one-third of all respondents indicated

that their policy was to prepare documentation on a

country-by-country basis as needed; based upon

responses with respect to experience on audit, it

appears that one-half of these prepare documentation

only when an audit occurs. These companies may be

at penalty risk in some countries should a transfer

pricing adjustment arise.

Overall, there was virtually no change from our 2003

Survey in the level of MNEs preparing globally coor-

dinated, multicountry documentation (up from 29%

to 32%) or in companies preparing single country

documentation (from 27% to 30%) (Table 8).

The percentage of parent company respondents that

considered transfer pricing to be purely a compli-

ance exercise has decreased slightly from 60% in the

2003 Survey to 54% in 2005. Although 2005 Survey

feedback indicates that the priorities for preparing

documentation have changed from prior Surveys,

only 9% use it to help identify tax planning opportu-

nities (Table 9).


Transfer Pricing Documentation Practices

Prepared for a single country and modified tomeet the needs of other jurisdictions as necessaryPrepared concurrently, on a globally coordinated basisPrepared on an as-necessary, country-by-country basis with limited coordination between countriesDid not prepare transfer pricing documentationUnknown

Consistency of documentationRisk/Mitigation reductionAudit defenseMinimize compliance costAbility to identify tax planning opportunitiesJudged case-by-case/strategic or reactive decisionHistoric practice/company policyNot stated

Table 8Approach to Transfer Pricing Documentation(Parent Companies)

Table 9Why MNEs Prepare TP Documentation

On an industry basis, respondents in the

Pharmaceutical sector stand out in several cate-

gories. This sector reported the highest level of

multicountry documentation (48% of respondents),

the highest number of respondents with an expecta-

tion of an audit (81%), and with an expectation of

double taxation (85%). Such high findings are

consistent with reported audit activity in the

United States, Canada and other countries.

In preparing documentation and managing transferpricing risk, it is useful to be aware of transfer pricing methods commonly used by other taxpayers(Table 10).

11

Table 10 Methods Used by Transaction Type (Parents)

TTaannggiibbllee GGooooddss IInntteerrccoommppaannyy LLiicceennssiinngg CCoosstt SShhaarriinngg FFiinnaanncciinnggSSeerrvviicceess AAggrreeeemmeennttss AAggrreeeemmeennttss

CUP 30% 17% 33% internal – 43% internal21% external – 14% external

Resale Price 17% – – - –Cost – 17% – 31 % –Cost Plus 26% 57% – 50 % –Profit Split 4% – 8% – 8%Profits-Based 16% – 12% – 15%Other/not stated 7% 8% 25% 19 % 21% Overall profits-based methods are increasingly used by tax authorities to test tangibles transactions whereas a minority of respondentsuse this approach.


The World Trade Organization (WTO) estimates that

intercompany transactions now account for as much

as 50% of all global trade. As much as 25% of merg-

ers and acquisitions activity in recent years has

involved cross-border combinations, and emerging

economies are absorbing a larger proportion of new

investments and trade flows. Interestingly, MNEs

from emerging economies such as China and India

are redirecting investments into developed

economies, further changing the dynamics of inter-

national trade.

To some extent, the emerging economies are build-

ing comparative advantages in production and ser-

vices. Economic growth in China and Eastern

Europe reflects advantages in manufacturing, while

India is building global power in software, consult-

ing, technical, and support services. Other transfor-

mations include the growing importance of financial

and other services in North American and Western

European countries at the expense of their manufac-

turing base. Global competition for resources, mar-

kets, and production efficiencies continues to drive

intercompany cross-border flows of capital, goods

and services, and, increasingly, intellectual property.

International business combinations have also

increased significantly in size and scope in the past

five years, including several “revolutionary” events.

These include the acquisition of IBM’s computer

manufacturing business by China-based Lenovo in

2004, the proposed $18 billion acquisition of a

major U.S. oil company by China-based CNOOC

this past year, the acquisition of portions of Russia’s

oil production infrastructure by U.S., UK, and

Chinese multinationals, the penetration of the U.S.

software and services market by India-based MNEs,

and the establishment of global consortia in the steel

and automotive industries by firms such as

DaimlerChrysler and Mittal Steel. The expanding

pace and scope of globalization by these and other

large MNEs have greatly increased the complexity

of their supply chains and, with it, the importance of

transfer pricing planning and documentation.

As investment becomes increasingly mobile and

multinational companies expand their global supply

chains, it is clear that competition for investment

and taxes is driving more legislation and enforce-

ment by revenue authorities. We found that

multinational companies are responding by elevating

the importance of transfer pricing within their

organizations and dedicating more resources to

understanding, planning, and documenting their

intercompany pricing.

New Frontiers: Investment in Asia Raises New Tax Issues that are Being Addressed in Different WaysOur 2005 Global Survey points to an increasingly

diverse investment landscape. Survey respondents

are investing globally in new markets, stimulated in

part by emerging economies in Asia, Central

Europe, and elsewhere. These investments create

tax planning opportunities, as many of these

economies differ in their approaches to taxation.

Today’s playing field has changed as China and

India represent attractive alternatives for locating

manufacturing and services, and, increasingly,

research and development activities. These

economies now produce more science and engineer-

ing graduates than the United States and Europe.

They are also making investments in infrastructure,

institutions, and capital markets that will stimulate

their productivity and economic growth, and, with

it, they are creating large consumer-driven markets

for goods and services.

Eastern Europe is also emerging as an attractive

location for heavy industry, as the European Union

expands to include these countries and barriers to

cross-border investment fall. Eastern Europe’s prox-

imity to the heavy industries of Western Europe and

advantages in labor costs make it a particularly

attractive location for the automotive sector and

other manufacturing industries.

Increasing Trans-Border Investment and Trade Lead to Transfer Pricing Complexities

13

Interestingly, the 2005 Survey results tell us that the

investment trend is not restricted to the movement

of new capital. In addition to new investment,

Survey respondents report that existing capital is

being redeployed to China and India. Twenty-three

percent of Survey parent respondents (and 33% of

U.S. respondents) reported either new or relocated

manufacturing operations in the past two years.

China is the largest beneficiary of this shift in the

manufacturing footprint compared to all other

investment regions, with 35% of affected Survey

respondents identifying China as the destination,

while Eastern Europe (primarily Hungary, Czech

Republic, and Poland) was the beneficiary of 25%

of the moves and Mexico of 15%.

Table 11Main Recipient of Manufacturing Footprint 2005

China

Mexico

United Kingdom

United States

Czech Republic

Hungary

Brazil

India

Poland

Switzerland

Germany

Ireland

Malaysia

The less than 10% of Survey parent respondents

who identified a shift in R&D footprint indicated

that India serves as a leading attraction for relocated

research and development activities (27%) followed

by China (17%). Generally, the major shifts in

manufacturing footprint to the Americas and

Europe occur within the same region; however the

move of manufacturing to China and the R&D

movement are inter-regional.

Geographically, these shifts are shown in Table 12.

Table 12Portion of Significant Manufacturing and R&D ShiftsMMaannuuffaaccttuurriinngg AAmmeerriiccaass AAssiiaa--PPaacciiffiicc EEuurrooppee

To China 42% 6% 52%

To Eastern Europe 5% – 95%

To Latin America 73% – 27%RR&&DD AAmmeerriiccaass AAssiiaa--PPaacciiffiicc EEuurrooppee

To India 89% – 11%

To China 84% – 16%

Other Changes to Supply Chains Worldwide, merger and acquisition activity has

recovered since 2001 to nearly record levels this

year. Our Survey responses are consistent with this

trend, with 48% of parent respondents citing this

type of activity as one of the significant interna-

tional business changes that they have undertaken

in the last three years. The sectors where the major-

ity of respondents identify merger and acquisition

activity as a “leading driver of business change”

are:

Retail and consumer products—58%

Energy chemicals and utilities—52%

Industrial products (including automotive)—51%

Of particular significance is the extent of changes in

the business supply chain, with 34% of parent

respondents implementing strategic sourcing

strategies and 33% reporting other supply chain

transformations.

As businesses change, organizations’ approach to

transfer pricing has likewise changed. When respon-

dents were asked about whether they were using

business change more or less in the last two or three

years as the means to “implement transfer pricing or

tax planning,” 32% of all respondents indicated they

had used it more. Nearly half (49%) of the U.S.

parent respondents said they used business change

to implement their transfer pricing or tax planning.

0% 10% 20% 30% 40%

35%

15%

11%

9%

7%

6%

5%

5%

5%

5%

4%

4%

4%


Ernst & Young’s 2005 Survey findings reflect the

longstanding perceived importance of transfer

pricing to tax directors. Globally, it was identified by

more parent companies as the most important tax

issue they faced.

Table 13Most Important Tax Issues for Tax Directors

Transfer Pricing

Tax Minimization

Double Taxation

Value Added Taxes

Tax Controversy

Customs Duties

Foreign Tax Credits

Forty-three percent of European and 49% of Asia-

Pacific respondents identified transfer pricing as the

most important tax issue facing their organizations.

Respondents in a few countries ranked tax planning

as their most important issue, including the U.S.

where tax planning was ranked first or second by

70% and transfer pricing by 59% of respondents.

Table 14 compares the importance of Transfer

Pricing in each of our last five surveys.

On an industry basis two sectors stand out from the

rest. Transfer pricing is the single “most important

issue” for 57% of respondents in the Pharmaceutical

sector and 46% of respondents in the Retail sector.

These numbers were much larger than the responses

in the other sectors we surveyed.

Most Important Issue in the Next Two YearsNot only is transfer pricing the highest tax priority

for MNEs now, it seems likely to remain so. Nearly

77% of the companies we surveyed believe that

transfer pricing will be important or absolutely

critical in the next two years.

80%

70%

60%

50%

40%

30%

20%

10%

0%1997 1999 2001 2003 2005

Table 14Growth and Current Importance of Transfer Pricing

Very ImportantFairly ImportantNot Very ImportantNot at all Important

0% 10% 20% 30% 40%

38%

31%

9%

8%

6%

3%

3%

Transfer Pricing Dominates the Agenda

15

Table 15Importance of Transfer Pricing Next Two Years

Absolutely Critical

Very Important

Fairly Important

Not Very Important

Not at All Important

The Role of the Tax FunctionCorporations are involving Tax Directors moreoften and at an earlier stage in the business processthan they did five years ago. A number of factors,including tax planning objectives (which 86% ofSurvey parent respondents and 97% of U.S. parentssaid was “very important” or “important”), overallinternational business changes, and risk manage-ment may be driving this change.

The level of Tax Director involvement may also belinked to the level of importance that MNEs placeon transfer pricing strategies in achieving theirgoals. Transfer pricing is increasingly perceived asless of a compliance issue and more of a planningissue that contributes value. Consistent with thistrend, 29% of respondents indicate that they usetransfer pricing strategies in lieu of other tax plan-ning strategies.

Table 16Use of TP Strategies Compared With Other Tax Planning

More Frequently

Less FrequentlySame Frequency/

No Change

Not Stated

One of the most significant indications of thechanging role of the Tax Director is the stage atwhich the corporate tax department is involved inbusiness change. Despite only a slight reductionover the past five years in the number of respon-dents which do not involve the tax department inbusiness change at all (5% down from 9%), there

has been a dramatic shift in the stage at which taxdepartments do become involved. Sixty-eight per-cent of MNEs will have tax department involvementin projects by the time they are being initiated (upfrom 43% five years ago). The country where thegreatest change can be seen in this trend is theUnited States. Eighty percent of U.S. respondentsnow involve the Tax function in the “concept or initiation phase,” compared with 40% five yearsago. However, in Australia and Japan, Tax Directorsare involved later in the change process than theirinternational counterparts, which might result in lessopportunity to properly capture tax planning oppor-tunities arising from the changes in strategy.

Table 17Stage at Which the Tax Department is Involvedin Business Change 2005

Concept Phase

Project Initiation

Mid-way/Implementation

At Conclusion

Not at All

Not Stated

Table 18Stage at Which the Tax Department wasInvolved in Business Change 2000

Concept Phase

Project Initiation

Mid-way/Implementation

At Conclusion

Not at all

Not Stated

Transfer Pricing Profile in the OrganizationTransfer pricing largely remains as a tax departmentresponsibility, and respondents report that, thenumber of people dedicated to transfer pricing withintheir organizations has increased since 2003 (anaverage of 2.55 people in 2005 compared with anaverage of 1.56 people in 2003). Even so, 34% ofrespondents now place ultimate responsibility fortransfer pricing on the Financial Director or ChiefFinancial Officer.

0% 10% 20% 30% 40% 50%

30%

47%

16%

4%

1%

0% 15% 30% 45% 60%

29%

14%

57%

1%

0% 10% 20% 30% 40%

41%

27%

18%

6%

5%

6%

0% 10% 20% 30% 40%

24%

19%

26%

15%

9%

7%


TTrraannssffeerr PPrriicciinngg PPoolliiccyy BBeeeenn EExxaammiinneedd bbyy tthhee RReevveennuuee AAuutthhoorriittiieess iinn aannyyCCoouunnttrryy EEiitthheerr SSeeppaarraatteellyy oorr aass PPaarrtt ooff aa BBrrooaaddeerr RReevviieeww

GGlloobbaall AAmmeerriiccaass AAssiiaa PPaacc EEuurrooppeeYes 65% 66% 47% 69%No 34% 34% 51% 31%

KKnnoowwnn OOuuttccoommeess——PPeerrcceennttaaggee ooff IInnqquuiirriieess RReessuullttiinngg iinn AAddjjuussttmmeennttss GGlloobbaall AAmmeerriiccaass AAssiiaa PPaacc EEuurrooppee44% 55% 21% 42%

CCiirrccuummssttaanncceess MMoosstt LLiikkeellyy ttoo TTrriiggggeerr TTrraannssffeerr PPrriicciinngg DDiissppuutteess WWiitthh RReevveennuuee AAuutthhoorriittiieess

GGlloobbaall AAmmeerriiccaass AAssiiaa PPaacc EEuurrooppeeIncrease in audit and enforcement targets by fiscal authorities 71% 81% 67% 64%Change in transfer prices 60% 55% 67% 63%Significant monetary volume of transactions 58% 54% 58% 61%Changes in taxable income of the audited entity 56% 50% 42% 64%Recorded losses 56% 55% 60% 56%New legislation 51% 50% 37% 55%Restructured operations50% 45% 35% 59%Complexity of transactions 48% 47% 60% 47%

Regional InsightsThe following tables highlight some of the regional findings from parent companies participating in the Survey.

ExaminationsRegardless of region, a transfer pricing audit is likely. Two-thirds of Survey participants indicated that they have been subject to a transfer pricing auditsince 2001. The reasons underlying the audit activity are generally consistent,with respondents in all regions citing “increased enforcement targets by fiscalauthorities” as the most likely audit trigger.

Responses about the outcome of audits vary by region. Respondents from theAmericas and Europe have a higher percentage of adjustments than haveresulted from audit inquiries in Asia Pacific.

17

UUllttiimmaattee RReessppoonnssiibbiilliittyy ffoorr EEnnssuurriinngg TTrraannssffeerr PPrriicciinngg CCoommpplliiaannccee WWiitthh TTaaxx LLaawwssGGlloobbaall AAmmeerriiccaass AAssiiaa PPaacc EEuurrooppee

Tax Department 50% 73% 30% 38%CFO/FD 34% 19% 51% 40%Audit Committee 4% 2% 5% 6%Other 11% 6% 7% 15%Not stated 1% 0% 7% 1%

IImmppoorrttaannccee ooff TTPP DDooccuummeennttaattiioonn CCoommppaarreedd ttoo TTwwoo YYeeaarrss AAggooGGlloobbaall AAmmeerriiccaass AAssiiaa PPaacc EEuurrooppee

More important 71% 68% 58% 76%Less important 2% 2% 2% 2%Same importance 27% 30% 40% 22%

AApppprrooaacchh ttoo TTrraannssffeerr PPrriicciinngg DDooccuummeennttaattiioonnGGlloobbaall AAmmeerriiccaass AAssiiaa PPaacc EEuurrooppee

Prepared concurrently, on a globally coordinated basis 33% 28% 26% 39%Prepared for a single country and modified to meet the needs of other jurisdictions as necessary 30% 33% 12% 32%Prepared on an as-necessary, country-by-country basis with limited coordination between countries 33% 35% 47% 27%Did not prepare transfer pricing documentation 5% 4% 16% 2%

HHiigghheesstt PPrriioorriittiieess iinn PPrreeppaarriinngg TTrraannssffeerr PPrriicciinngg DDooccuummeennttaattiioonn ((AAllll RRaannkkeedd 11sstt))

GGlloobbaall AAmmeerriiccaass AAssiiaa PPaacc EEuurrooppeeConsistency of documentation 28% 24% 25% 32%Risk mitigation/ reduction 24% 20% 47% 22%Audit defense 18% 26% 11% 14%Minimize compliance costs 11% 15% 6% 8%Ability to identify tax planning opportunities 9% 10% 6% 10%Judged case by case/ strategic or reactive decision 6% 2% 3% 10%Historic practice/ company policy 3% 2% 3% 3%

ComplianceOnly a third of company respondents prepare transfer pricing documentationglobally, a slight increase from previous Surveys. Overall, however, documenta-tion is consistently more important than it was two years ago. The reasons forpreparing documentation vary slightly by region. In Asia Pacific, “risk mitigation

or reduction” is a significant factor in why documentation is prepared, whereasin the Americas, the most common reason given is “audit defense.” Differencesalso remain between the Americas and Asia Pacific and Europe with respect towho has responsibility for the transfer pricing compliance.

RE G I O NA L IN S I G H T S


TThhee MMoosstt IImmppoorrttaanntt IIssssuueess ffoorr GGrroouupp GGlloobbaall AAmmeerriiccaass AAssiiaa PPaacc EEuurrooppee

Transfer pricing 38% 27% 49% 43%Planning 31% 42% 19% 27%

TThhrreeee MMoosstt IImmppoorrttaanntt IIssssuueess ffoorr GGrroouupp ((AAllll RRaannkkeedd 11--33))GGlloobbaall AAmmeerriiccaass AAssiiaa PPaacc EEuurrooppee

Transfer pricing 78% 70% 79% 82%Planning 65% 73% 44% 65%Double taxation 46% 44% 58% 44%Tax controversy 35% 39% 26% 34%Foreign tax credits 30% 39% 44% 20%Value added taxes 29% 21% 26% 36%Customs duties 14% 13% 16% 15%

HHooww IImmppoorrttaanntt AAnnttiicciippaattee TTrraannssffeerr PPrriicciinngg ttoo bbee ffoorr GGrroouupp iinn TTwwoo YYeeaarrssGGlloobbaall AAmmeerriiccaass AAssiiaa PPaacc EEuurrooppee

Absolutely critical 30% 40% 30% 23%Very important 47% 41% 42% 53%Fairly important 16% 16% 19% 16%

SSttaaggee aatt WWhhiicchh tthhee PPaarreenntt CCoommppaannyy TTaaxx DDeeppaarrttmmeenntt WWoouulldd HHaavvee BBeeeenn IInnvvoollvveeddTTooddaayy aanndd FFiivvee YYeeaarrss AAggoo

GGlloobbaall AAmmeerriiccaass AAssiiaa PPaacc EEuurrooppeeConcept phase 41% 24% 47% 28% 22% 22% 38% 22%Project initiation 27% 19% 32% 18% 33% 28% 22% 19%Mid-way/ implementation 18% 26% 15% 29% 33% 17% 18% 25%At conclusion 6% 15% 3% 18% 6% 22% 9% 12%

TodayFive Years Ago

NNuummbbeerr ooff PPeeooppllee DDeeddiiccaatteedd ttoo TTrraannssffeerr PPrriicciinngg TTooddaayy aanndd 22000033GGlloobbaall AAmmeerriiccaass AAssiiaa PPaacc EEuurrooppee

2005 2.55 1.91 7.00 2.452003 1.56 1.55 5.46 1.26

PlanningThe tax issues that Survey respondents in all regions cite as the most impor-tant are transfer pricing, planning and double taxation, which is an aspect oftransfer pricing. Tax planning is identified as the number one priority of therespondents in the Americas, whereas in Asia Pacific and Europe transfer

pricing is clearly number one. When asked about the relative importance oftransfer pricing in two years time, a high percentage of respondents in theAmericas and Asia Pacific said it was “absolutely critical” for them.

19

For the first time in 2005, a mixed methodology

approach was undertaken in Ernst & Young’s bien-

nial survey to observe the target group’s reception to

a Web-based Survey. The 2005 Survey methodology

included telephone interviews and online interviews,

run in parallel.

SampleThe sample was originally drawn from Dun &

Bradstreet in the United States and updated with

e-mail addresses by Ernst & Young. Some markets

were augmented using local Ernst & Young lists,

ensuring that all companies conformed to the overall

specification criteria.

All companies were first qualified for inclusion and

any that failed to meet the qualification criteria were

screened out at the start of the interview. The sample

universe can be described as all global ultimates of

MNEs (i.e. the company is headquartered in that

market, not a subsidiary) which meet the following

criteria:

If global ultimate is in U.S. or Canada, it should

have revenue of at least $500 million and have

affiliates/subsidiaries on at least two continents

besides North America (e.g., Europe and South

America, Africa and Australia, etc.). If the list

of companies with revenue over $500 million is

short, the list will be completed with the next

largest companies with the global ultimate in that

country (i.e. starting at $499 million revenue).

If global ultimate is in Korea or Japan, it should

have revenue of at least $250 million and have

affiliates/subsidiaries on at least two continents

besides Asia. If the list of companies with rev-

enue over $250 million is short, the list will be

completed with the next largest companies with

the global ultimate in that country (i.e. starting at

$249 million revenue).

If global ultimate is in one of the European

markets, it should have affiliates/subsidiaries in

at least five other countries (the five or more

other countries can be anywhere in the world).

If the list of companies which fit this criteria is

short, the list will be completed with companies

with subsidiaries in four, then if necessary, three

other countries.

If global ultimate is in Latin America, Australia,

or New Zealand, it should have affiliates/sub-

sidiaries on at least two other continents (e.g.

Europe and Asia, Europe and North America,

etc.). If necessary, the lists will be completed

with largest companies with subsidiaries on only

one other continent.

Please direct questions regarding this transfer

pricing survey report to:

Methodology

GGlloobbaall::

Bob Turner 1416/943-3513 [email protected]

Tobin Hopkins 1312/879-3137 [email protected]

Steve Curtis 1212/773-8763 [email protected]

Meg Salzetta 1312/879-4217 [email protected]

AAmmeerriiccaass::

Karen Kirwan 1202/327-8731 [email protected]

AAssiiaa PPaacciiffiicc::

Dianna Lane 61 3/9288-8826 [email protected]

David Lewis 61 3/9288-8700 [email protected]

EEuurrooppee::

Jesper Solgaard 46 852 059 860 [email protected]


GGlloobbaall CCEEOO —— TTrraannssffeerr PPrriicciinngg SSeerrvviicceess

RRoobbeerrtt DD..MM.. TTuurrnneerr TToorroonnttoo ((11)) 441166//994433--33551133 BBoobb..TTuurrnneerr@@ccaa..eeyy..ccoomm

GGlloobbaall DDiirreeccttoorr ooff TTrraannssffeerr PPrriicciinngg GGoo ttoo MMaarrkkeett SSeerrvviicceess

JJoohhnn HHoobbsstteerr LLoonnddoonn ((4444)) 2200//77995511--66443388 jjhhoobbsstteerr@@uukk..eeyy..ccoomm

TTaaxx EEffffeeccttiivvee SSuuppppllyy CChhaaiinn MMaannaaggeemmeenntt

LLeeee OOsstteerr PPaarriiss ((3333)) 11//4466--9933--8866--2211 LLeeee..OOsstteerr@@eeyy--aavvooccaattss..ccoomm

Netherlands Victor Bartels Amsterdam (31) 20/549-7378 [email protected]

United Kingdom Owen Crassweller London (44) 20/7951-3395 [email protected]

Switzerland Jean-Marc Girard Geneva (41) 58 286 5890 [email protected]

United States Tobin Hopkins Chicago (1) 312/879-3137 [email protected]

United States Lisa Lim New York (212) 773-4756 [email protected]

DDiirreeccttoorr ooff TTrraannssffeerr PPrriicciinngg SSeerrvviicceess —— AAmmeerriiccaass

RRoobbeerrtt EE.. AAcckkeerrmmaann WWaasshhiinnggttoonn,, DDCC ((11)) 220022//332277--55994444 BBoobb..AAcckkeerrmmaann@@eeyy..ccoomm

Argentina Carlos Casanovas Buenos Aires (54) 11/4318-1619 [email protected]

Brazil Thorsten Reelitz São Paulo (55) 11/3523-5589 [email protected]

Canada Robert D.M. Turner Toronto (1) 416/943-3513 [email protected]

Chile Sergio Sapag Santiago (56) 2/676-1676 [email protected]

Colombia Enrique Gonzalez Bogota (57) 1/651-2210 ext. 255 [email protected]

Costa Rica Rafael Sayagues San Jose (506) 204-9029; (1) 212/773-4761 [email protected]

Mexico Jorge Castellon México City (52) 55/5283-1300 ext. 8671 [email protected]

Peru Marcial Garcia Peru (51) 1/411-4424 [email protected]

United States Robert E. Ackerman Washington, DC (1) 202/327-5944 [email protected]

United States Michael J. Merwin Chicago (1) 312/879-6565 [email protected]

Venezuela Katherine Pinzon Caracas (58) 212/953-52-22 ext. 185 [email protected]

DDiirreeccttoorr ooff TTrraannssffeerr PPrriicciinngg SSeerrvviicceess —— AAssiiaa--PPaacciiffiicc

PPhhiilliipp AAnnddeerrssoonn SShhaanngghhaaii ((8866)) 2211//22440055--22226699 PPhhiilliipp..AAnnddeerrssoonn@@ccnn..eeyy..ccoomm

Australia David Lewis Melbourne (61) 3/9288-8700 [email protected]

China Philip Anderson Shanghai (86) 21/2405-2269 [email protected]

India Srinivasa Rao Bangalore (91) 98450-04866 [email protected]

Indonesia Rachmanto Surahmat Jakarta (62) 21/5289-5587 [email protected]

Japan Ken Okawara Tokyo (81) 3/3506-2461 [email protected]

Korea Ken Cook Seoul (82) 2/3770-0900 [email protected]

Malaysia Yvonne Chan Kuala Lumpur (60) 3/2087-4511 [email protected]

New Zealand Leslie Prescott-Haar Auckland (64) 9/300-8111 [email protected]

Phillipines Romulo Danao Manila (63) 2/894-8392 [email protected]

Singapore Jesper Solgaard Singapore [email protected]

Taiwan George Chou Tai Pei (886) 2/2720-4000 ext. 2735 [email protected]

Thailand Anthony V. Loh Bangkok (66) 2/264-0777 ext. 6008 [email protected]

Ernst & Young’s Global Transfer Pricing and Tax Effective Supply Chain Management PracticeCountry Contacts

21

DDiirreeccttoorr ooff TTrraannssffeerr PPrriicciinngg SSeerrvviicceess —— EEuurrooppee,, MMiiddddllee EEaasstt,, aanndd AAffrriiccaa

OOlliivveerr WWeehhnneerrtt DDüüsssseellddoorrff ((4499)) 221111//99335522--1100662277 OOlliivveerr..WWeehhnneerrtt@@ddee..eeyy..ccoomm

EEuurrooppeeaann DDiirreeccttoorr ooff TTrraannssffeerr PPrriicciinngg GGoo ttoo MMaarrkkeett SSeerrvviicceess

CCuurrtt KKiinnsskkyy PPaarriiss ((3333)) 11//4466--9933--6655--7711 CCuurrtt..KKiinnsskkyy@@eeyy--aavvooccaattss..ccoomm

Austria Christa Heintz Vienna (43) 1/211-70-1263 [email protected]

Belgium Herwig Joosten Brussels (32) 2/774-93-49 [email protected]

Czech Republic Jiri Teichmann Prague (420) 225-335-327 [email protected]

Denmark Carston Dall Larson Copenhagen (45) 3/587/2767 [email protected]

Finland Kirsi Hiltunen Helsinki (358) 9/1727-7220 [email protected]

France Antoine Glaize Paris (33) 1/55-61-14-06 [email protected]

Germany Oliver Wehnert Düsseldorf (49) 211/9352-10627 [email protected]

Greece Alexandros Karakitis Athens (30) 210/28-86-398 [email protected]

Hungary Denes Szabo Budapest (36) 1/451-8209 [email protected]

Ireland Joe Bollard Dublin (353)1/2212457 [email protected]

Italy Davide Bergami Milan (39) 02/851-4409 [email protected]

Netherlands Erik Kamphuis Amsterdam (31) 20/549-7327 [email protected]

Norway Marius Leivestad Oslo (47) 2/400-2386 [email protected]

Poland Karen Chaczbabian Warsaw (48) 22/557-8990 [email protected]

Portugal Paulo Mendonca Lisbon (351) 21791-20-45 [email protected]

Russia Julia Maximovskaya Moscow (7) 095/755-9688 [email protected]

Slovakia Viera Karlikova Bratislava (421) 2/59-229-604 [email protected]

South Africa Sean Kruger Johannesberg (27) 11/772-3996 [email protected]

Spain Juan José Terraza Torra Barcelona (34) 933-663-741 [email protected]

Sweden Jesper Solgaard Stockholm (46) 8/520-598-60 [email protected]

Switzerland Urs Brugger Zurich (41) 58/286-3168 [email protected]

Turkey Erdal Calikoglu Istanbul (90) 212/315-3000 [email protected]

United Kingdom Joel Segal London (44) 20/7951-5339 [email protected]

Ernst & Young’s Global Transfer Pricing and Tax Effective Supply Chain (TESCM) PracticeSuccessfully solving the business and tax issues related to transfer pricing is not simply an exercise in compliance. Transfer pricing

affects almost every aspect of a multinational organization and is a major influence on your worldwide tax burden. Ernst & Young

transfer pricing and TESCM professionals are available to help you address this burden and help you to identify long-term tax and

business benefits. The size of our practice and its global reach allow us to tackle and offer test approaches to the most pressing

transfer pricing and business change tax issues. We have integrated tax and economics into a unified transfer pricing approach that

is an Ernst & Young hallmark. Our multiskilled teams help you plan your transfer pricing strategy, offer ways to manage tax planning,

and can help you to defend your position and practices. Our highly respected transfer pricing and TESCM professionals apply their

experience in tax, economics, research, government, accounting, and international business to develop creative and practical solu-

tions to your transfer pricing needs.

ey.com/transferpricingsurveyER N S T & YO U N G

© 2005 EYGM Limited

All Rights Reserved.

EYG No. CS0005

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This publication has been carefully prepared but it necessarily contains information

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