International tax authorities have increased their sophistication over the years to become much more aggressive at investigating and enforcing tax compliance. While the intent of transfer pricing is to represent the true cost of goods and services in each tax jurisdiction, a major theme today is ensuring tax compliance across an often complex set of legal entity routings.
Large end-of-year adjustments have become a red flag for tax authorities and are increasingly being disallowed. This can leave substantial amounts of money unrecoverable in tariffs, duties, or higher tax jurisdictions, not to mention the potentially high cost of enforcement actions. Because of this, tax compliance cannot just be about designing an optimal transfer pricing process, it must also measure it in real-time so monthly adjustments can be made in order to hit the targets.
PlaidCloud helps to ensure the designed transfer pricing process is being followed and that adjustments are made throughout the year in a transparent and auditable manner. Applying markups, calculating royalty payments, and other critical information is simply part of the controlled process rather than being left as an offline processes which are often over simplified, highly manual, and a significant audit focus.
PlaidCloud does and can support transfer pricing processes at companies with billions of dollars of cost moving between tax jurisdictions for both services and tangible goods.