There have been situations in which businesses pay for services upfront as a lump sum for administrative ease. However in establishing intra-group payments on this basis is there a risk that tax administrations may challenge deductions under transfer pricing principles? Under arm’s length conditions can I make a lump sum payment for a service upfront or should there be an annual charge in the P&L?
Answer
The answer to the question is ‘yes’ although this is not as straightforward as one may think.
Recent case studies with an upfront charge
Whilst annual intra-group provisions are commonplace in comparison to more complex transactions it is important to assess a transaction over the specific economic life as opposed...
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There have been situations in which businesses pay for services upfront as a lump sum for administrative ease. However in establishing intra-group payments on this basis is there a risk that tax administrations may challenge deductions under transfer pricing principles? Under arm’s length conditions can I make a lump sum payment for a service upfront or should there be an annual charge in the P&L?
Answer
The answer to the question is ‘yes’ although this is not as straightforward as one may think.
Recent case studies with an upfront charge
Whilst annual intra-group provisions are commonplace in comparison to more complex transactions it is important to assess a transaction over the specific economic life as opposed...
If you or your firm subscribes to Taxjournal.com, please click the login box below:
If you do not subscribe but are a registered user, please enter your details in the following boxes:
.jpg?sfvrsn=335a554c_0 "300 x 250 (MPU)")