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October 15, 2025
The EU’s Omnibus Package on ESG signifies a strategic move to streamline the EU’s regulatory framework, reducing administrative burdens and boosting competitiveness at a critical time for sustainable growth. By aligning reform efforts with global trends and climate goals, the initiative aims to enhance investment, foster innovation, and position Europe as a leader in responsible markets. Its success could serve as a model for international standards, attracting foreign investment and shaping future global practices in green finance and sustainable development.
The European Commission’s proposal of the Omnibus Package represents a strategic effort to streamline a complex regulatory landscape that has grown increasingly challenging for businesses, consumers, and policymakers alike. This initiative is driven by the need to address mounting administrative burdens, enhance the efficiency of EU regulations, and foster a more competitive environment conducive to sustainable growth.
Several motivations underpin this move. Firstly, the EU faces ongoing global competition, which necessitates regulatory agility to ensure European companies can innovate and scale without being hindered by excessive legislative red tape. According to the European Commission’s own commitment, they aim to reduce administrative burdens by at least 25%, and up to 35% for SMEs, to improve the business environment (European Commission, “Better regulation”).
Secondly, the evolving climate and sustainability agendas, exemplified by the European Green Deal, demand a more coherent and simplified framework to mobilize investments, improve compliance, and meet ambitious climate targets for 2030 and beyond. The Green Deal’s overarching goals are outlined in the European Commission’s strategy document.
Current market conditions further amplify the need for reform. Businesses are grappling with fragmented rules that often overlap and evolve rapidly, leading to increased costs, reduced transparency, and diminished agility. The European Court of Auditors highlighted that existing regulatory fragmentation hampers the effectiveness of sustainability policies, calling for streamlined and coherent EU legislation (“Special report 10/2018: Better regulation, more Effective Regulation” ).
Regulatory complexity also impacts international attractiveness, potentially discouraging foreign investment and limiting the EU’s ability to lead in global clean-tech and sustainable finance sectors. The European Investment Bank highlights that regulatory uncertainty can inhibit green investments, which are crucial for achieving climate goals.
The Omnibus Package proposes revisions to four key pieces of ESG-related legislation: the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), the Carbon Border Adjustment Mechanism (CBAM) and the EU Taxonomy Regulation.
In regard to the CSRD, the Omnibus Package proposes a higher employee threshold for companies in scope. Under the proposed revisions, companies with over 1,000 employees and either a turnover of more than €50 million or a balance sheet of more than €25 million still need to report. The employee threshold was previously 250 employees. The turnover threshold is also being increased for non-EU parent companies, from over € 150 million to over € 450 million. The ESRS data points are being simplified, no sector-specific standards will be developed, and only limited assurance will be required (as opposed to limited and reasonable). Furthermore, according to the Stop-the-Clock proposal, which has been adopted by the European Commission, there is a postponement to reporting for large non-listed organisations and listed small- and medium-sized enterprises (SMEs) by two years (2025 to 2027 and 2026 to 2028).
For the CSDDD, the Omnibus Package proposes delays of one and two year(s) to the transposition and compliance deadlines, respectively, to 26th July 2027 and to 26th July 2028. Furthermore, the due diligence obligation will be limited to direct business partners only, and the requirement to terminate business relationships when severe potential or actual adverse impacts are identified is being removed. Review cycles are being increased to five years, and the EU-level civil liability is being removed, leaving it up to national regimes.
For the EU Taxonomy, the Omnibus Package proposes focusing the KPIs on the very large companies only, with over 1,000 employees and more than €450 million in turnover. The disclosures are also being made simpler and lighter, with streamlined templates and a de minimis exemption, whereby no reporting will be required on activities that comprise less than 10% of turnover. Financial institutions will also be able to defer detailed KPIs to 31st December 2027.
These revisions simplify the reporting, align the provisions of different regulations and reduce the bureaucracy involved, thereby reducing the cost, time and effort required by businesses in scope to comply. The Stop-the-Clock proposal also gives businesses in scope more time to prepare their reporting. 80% fewer firms are estimated to be out of scope with these revisions, thereby removing an administrative burden and related costs for many SMEs. Furthermore, the limited assurance requirement makes it easier for businesses to comply and simpler for regulators to review. Enforcement will also remain national, which requires fewer resources and time.
Less coverage in data points and reduced overall transparency in reporting mean that the amount of ESG data available will significantly decrease, so users of this data (e.g. consumers, regulators, clients, partners, investors, media, public, etc.) will face a higher risk of blind spots and harder cross-sector comparability, particularly for high-impact sectors. The risks of scrutiny also increase as transparency decreases. The proposed revisions have also created uncertainties for businesses and a lack of clarity for the market. The requirement for limited assurance only will potentially impact the quality of the data being reported and reduce the need for relevant assurance services, negatively impacting service providers. Furthermore, companies out of scope may still have to comply with ESG procurement questionnaires from their value chain, so these companies will still need to allocate resources to comply and may be less prepared to do so, or able to score highly. With enforcement remaining only national, there is also the risk of patchwork liability and conflicting standards across the EU. Given that legislation in other regions tends to follow the EU, these revisions may also lead to a domino effect of revisions to similar pieces of legislation in other geographical areas e.g. Asia-Pacific, North America, etc., with more significant global market implications.
The adoption of the Omnibus Package positions the EU at a pivotal juncture, aligning its regulatory approach with broader international trends while signalling a clear shift towards more pragmatic and business-friendly policies. On an EU level, this initiative supports the continent’s strategic commitments under the European Green Deal and its sustainability objectives for 2030.
By reducing administrative burdens and enhancing regulatory clarity, the EU aims to incentivise sustainable investment, support innovation, and maintain its competitiveness on the global stage. The European Commission’s “Sustainable finance in the EU” report highlights the importance of regulatory clarity for mobilising private investments in sustainable finance. Externally, the implications are equally significant. As global markets increasingly prioritise sustainability and responsible business practices, the EU’s efforts to streamline and enhance its regulatory framework could serve as a model for other regions. The OECD’s recent publication on “Global Coordinated Approaches to Sustainable Finance” underscores that regulatory convergence plays a crucial role in fostering international investment flows and shared standards.
Countries and trading partners that align their policies with sustainable development goals may view the EU’s reforms as a benchmark to follow, thus shaping international standards in the years to come. The European Central Bank has also stressed that regulatory stability and transparency are vital for fostering sustainable finance at the global level.
Furthermore, a more streamlined EU framework can positively influence global supply chains. The World Economic Forum emphasizes that regions leading in clean technology and governance standards tend to attract more foreign direct investment (FDI) and drive innovation (World Economic Forum, “Why integrated and regenerative leadership is vital for the future of global value chains”).
The Omnibus Package does not change the EU’s legally binding 2030 target of reducing net greenhouse gas emissions by 55% compared to 1990, nor does it impact other key tools, such as the EU’s Emissions Trading System (ETS). The simplifications are intended to cut red tape and focus efforts on businesses with the biggest impact, in order to reduce costs and free up management capacity. The aim is to therefore to boost the competitiveness of all EU businesses, incentivise sustainable investment and support cross-sectoral innovation. The Package, therefore, remains in law.
However, the delays it introduces in reporting and the narrower scope of reporting and due diligence introduce execution and monitoring risks for successfully achieving the 2030 pathway. This is because the revisions send market signals that will make it harder to mobilise private finance and verify progress. The reduction in data being reported also means that the volume of decision-useful high-quality ESG data available will be significantly less, therefore providing weaker steering signals for boards, banks and supervisors. Furthermore, due to the reduced number of businesses in scope, fewer companies will be allocating capital, time and human resources to meeting the 2030 and Green Deal goals, at least in the short-term. There will also be negative impacts on risk assessment of climate threats and transition plans of businesses. So while the Omnibus Package maintains future ambitions, such as the EU’s 2030 goal, it complicates the roadmap to achieve that 2030 goal. But the goal is still attainable.
The Omnibus Package revisions also present a business opportunity for the mid-market, which is no longer in scope of these pieces of legislation. The management of ESG issues ceases to be a burdensome tick-box exercise for compliance for SMEs, but becomes a strategic imperative and business enabler. It is critical for market access and growth, as well as for the cost of capital and financing opportunities for companies.
According to the Global Trade Report published by Thomson Reuters for 2024, 81% of global respondents consider ESG criteria as important or very important when choosing suppliers[1]. The World Economic Forum noted that in 2024, according to a KPMG survey, 45% of M&A deals encountered a significant deal implication due to a material ESG due diligence finding, with more than half of these experiencing a ‘deal stopper’[2]. Unmanaged climate risks could also significantly impact global equity value and translate into a 27% loss, with the worst-performing firms losing up to 75% of their value, according to Cornell University[3].
The message is clear. If you remain in scope of these key pieces of ESG legislation, the road to compliance is now simpler and more straightforward for you. But if you’re no longer in scope, keep investing in climate-change transition plans; in high-quality ESG data for your strategies and reporting; and in supply chain due diligence on ESG, because the long-term competitiveness and resilience of your business depends on it.
[1] Thomson Reuters Institute, 2024 Global Trade Report, December 2024, https://www.thomsonreuters.com/en-us/posts/international-trade-and-supply-chain/supply-chain-resilience/
[2] World Economic Forum, Corporate Responsibility makes financial sense. Here’s why. March 2025, https://www.weforum.org/stories/2025/03/why-esg-is-now-a-financial-imperative/
[3] Cornell University, Quantifying firm-level risks from nature deterioration, April 2025, https://arxiv.org/abs/2501.14391
October 9, 2025
Overview of R&D Tax Relief in the Netherlands
The Netherlands has a strong innovation-friendly tax regime designed to support businesses conducting research and development activities. The two most important tax incentives for R&D in the Netherlands are the WBSO (Wet Bevordering Speur- en Ontwikkelingswerk) program and the Innovation Box. Together, they help companies lower the cost of R&D by reducing their tax burden, providing tax credits, and offering tax exemptions on income derived from innovative activities.
WBSO (R&D Tax Credit)
The WBSO program provides direct tax relief on R&D expenses, effectively lowering the effective labour costs associated with R&D activities. This is the most common R&D tax incentive in the Netherlands and is available to both small and large companies involved in technological or scientific research.
The UK government has consolidated the previous R&D tax relief schemes—namely, the SME scheme and the R&D Expenditure Credit (RDEC)—into a single, unified framework. Referred to as ‘the merged scheme,’ this change aims to simplify the process, enhance compliance, and better support innovation across businesses of all sizes.
September 26, 2025
Discernment in accountancy is something that cannot be programmed. Hear from Merce Marti Queralt, Chairwoman and CEO at Kreston Iberaudit, on the power of human leadership in a digital world.
There is an increasingly widespread tendency to believe that what is old gets in the way, and that the new is the only path forward. As though experience is limited rather than enriched. Alongside this comes an almost automatic fascination with novelty.
In this climate, where newness asserts itself as a value in its own right, the way we look for answers has also changed. We live in the age of data, of algorithms, of immediacy. Everything seems to be just a click away, yet when everything is automated, the human factor becomes the real differentiator.
Having faced complex contexts, led through uncertainty and made decisions without absolute certainties, I can say that what truly makes the difference is knowing what to do with the information we have. It is knowing when to move forward, and when to pause, to reflect, to doubt, and to question it once again.
That is what we call judgment, and it is forged in practice. In hesitation. In mistakes. In the awareness that not everything urgent is important, nor everything new, better.
Today, we celebrate artificial intelligence as the great emblem of progress. And it makes sense: it processes, predicts, proposes… but the more it reads the data, the more it does not know how to interpret context. Because interpreting is not merely looking at the evidence; it is knowing when to trust it—and when to be wary of it too.
Do we want more agile and digital companies? Of course. But let us remember: agility is not haste, and technology is not wisdom.
We can rely on generative AI in accounting, but we should not forget: someone still has to decide—and that someone had better know how to discern.
The future of work is neither young nor old.
It is lucid. Demanding. Human.
And in that future, criterion is not expendable.
It is what sustains everything else.
September 5, 2025
Carried interest in Luxembourg rules are set to change following the government’s presentation of draft law n°8590 on 24 July 2025. Carried interest is the share of profits that an Alternative Investment Fund (AIF) allocates to its managers once a hurdle rate has been exceeded. The proposed regime aims to modernise tax treatment, strengthen legal certainty, and enhance Luxembourg’s attractiveness for international fund managers and investors.
The new regime would broaden the scope of beneficiaries. It would no longer be restricted to employees of management companies or AIF managers, but would also extend to individuals providing services to fund managers, including employees of external providers, independent directors, and non-employee partners.
Two types of carried interest are defined under the draft law. Contractual carried interest, based solely on contractual rights, would be classified as speculative gain and taxed at 25% of the progressive rate, resulting in an effective marginal rate of about 11.45%. Participation-linked carried interest, connected to a direct or indirect stake in the fund, would also be classified as speculative gain but could qualify for a full exemption if the participation is below 10% and held for more than six months. The exemption would cover both capital gains and distributed income, including through transparent structures.
Other important changes include making the preferential regime permanent, removing the rule that investors must first recover contributed capital before carried interest distributions, and allowing deal-by-deal structures. Beneficiaries of the current framework would automatically transition to the new regime. If adopted, the new system would take effect on 1 January 2026.
The reform is significant for Luxembourg’s alternative investment funds sector. It would provide greater clarity for managers and service providers, reduce the effective tax burden, and bring Luxembourg closer in line with international market practices. The reform also signals Luxembourg’s determination to remain a leading European hub for alternative investment funds in a competitive global environment.
The draft law is currently under parliamentary review. If passed, it will apply from 2026 and is expected to provide a clearer, more attractive framework for carried interest. For further analysis of draft law n°8590 and its implications, see Omnitrust.
August 26, 2025
July 7, 2025
June 30, 2025
The recent announcement by Kreston Global UK firm, Kreston Reeves, that it is launching new ESG advisory services highlights that strong ESG credentials remain a crucial and relevant service for the mid-market, despite recent deadline delays. The “Stop the Clock” announcement by the EU Commission in April 2025 has given mid-market firms more time to prepare, not a total veto to all obligations, explains Christina Tsiarta, Chair of the Kreston Global ESG Advisory Group.
“While for some organisations there’s a legal requirement to comply, for example in the UK, where the Department for Business and Trade just released the exposure draft of the UK Sustainability Reporting Standards, for others, it’s a matter of strategic importance and a differentiating factor in the marketplace.”
The regulatory and commercial drivers for environmental, social and governance (ESG) action are still critical for the mid-market to get out in front of. From new sustainability disclosure standards to investor and stakeholder pressure, businesses are being asked to show how they are building long-term value beyond financial returns.
Kreston Reeves, a UK member of the Kreston Global network, has launched a dedicated ESG Advisory and Reporting Service in response to this shift — a move that reflects a wider trend across the network.
“As the Chair of the Kreston Global ESG Advisory Group, I’m particularly excited to see a major firm in the network like Kreston Reeves introduce ESG advisory services,” says Christina Tsiarta. “It shows how critical ESG reporting and compliance have become for organisations of all sizes.”
While regulatory momentum continues to build, Christina believes compliance isn’t the only driver.
“Whatever the incentive, undoubtedly managing ESG issues provides an opportunity for organisations, especially mid-market ones, to grow sustainably and achieve long-term resilience.”
Kreston Reeves’ new ESG Advisory and Reporting Service is designed to help organisations embed ESG into strategic and financial planning. It offers support in four key areas:
“Strong ESG credentials are no longer a nice-to-have — they are essential to long-term success,” says Dan Firmager, ESG Adviser at Kreston Reeves. “Yet many organisations still struggle to understand and apply ESG thinking to day-to-day business decisions. Our service is designed to bridge that gap.”
The firm has partnered with ESG software provider Neoeco to deliver data-driven insights that align with financial reporting and assurance standards.
“Our ESG Advisory and Reporting Service is designed to bridge that gap, helping clients embed ESG into the heart of their operations, reporting and governance frameworks.”
Christina adds: “This is just one example of how Kreston firms are stepping up to support clients in navigating ESG demands. As expectations grow, the ability to offer clear, finance-aligned advice on ESG will become core to the trusted adviser role.”
Luxembourg’s expatriate tax regime is the latest tool in the country’s strategy to attract top international talent in an increasingly competitive global market for skilled professionals. Strategically located in the heart of Europe and known for the stability of its economic and tax environment, Luxembourg is reinforcing its position with the introduction of a new version of the regime, effective from January 2025.
This measure offers a straightforward and advantageous tax framework for professionals recruited from abroad, while addressing the needs of companies facing a shortage of specific expertise. It is a valuable tool for competitiveness in an increasingly mobile world. Aurore Calvi, Managing Director at Kreston network member OmniTrust in Luxembourg, shares her insight.
An “expatriate employee” refers to an individual hired outside Luxembourg or seconded by a foreign entity to work in Luxembourg. Unlike cross-border workers who commute daily, expatriate employees relocate and become Luxembourg tax residents.
These highly qualified profiles play a crucial role in innovation, technological development, and the competitiveness of companies in key sectors such as finance, engineering, and research.
· 50% exemption on annual gross salary, capped at €400,000 (excluding benefits in kind).
· Valid for up to 8 years, ensuring medium-term tax stability.
· Simplified administrative procedure, with no prior approval required; the employer initiates the process.
To qualify for the expatriate tax regime, several cumulative conditions must be met:
This regime is a powerful recruitment tool for attracting international talent. It allows companies based in Luxembourg (or operating there) to offer attractive net compensation packages without increasing their overall labour cost. Its simplicity is an additional benefit, especially for multinational groups used to managing complex mobility processes. It also enables them to remain competitive compared to other European jurisdictions.
| Country | Duration | Main Tax Benefit | Key Conditions |
| Luxembourg | Up to 8 years | 50% exemption on gross salary (max €400,000) | Foreign hire, must become tax resident, lived >150km away |
| France | Up to 8 years | Partial exemption on expatriation-related income | Not tax resident in France during the prior 5 years |
| Belgium | 5 + 3 years | 30% exemption via specific allowance | No residency or activity in Belgium in the past 5 years |
| Netherlands | Up to 5 years | Decreasing exemption on part of salary (30%, 20%, 10%) | Recruited from abroad |
Luxembourg stands out with a clear, generous, and easy-to-apply regime: no complex calculations, no hidden thresholds—just a transparent and straightforward exemption.
No prior approval is required, but Luxembourg’s Direct Tax Administration (ACD) may conduct audits afterwards. Employers must therefore retain all supporting documents for the full duration of the regime.
Employees already working in Luxembourg before 2025 can opt into the new regime, but this choice is irrevocable and should be considered carefully, ideally with professional tax advice.
Beyond the tax advantages, Luxembourg offers a highly favourable environment for international professionals. Located at the crossroads of Belgium, France, and Germany, it serves as a strategic base for international companies operating across European markets.
The country offers a safe, multilingual, and cosmopolitan living environment, with a workforce representing over 170 nationalities. Modern infrastructure, including international schools, facilitates family relocation. Labour laws are transparent and stable, providing reassurance to both employers and employees.
Combined with its strong economy, proximity to European institutions, and vibrant financial and tech sectors, Luxembourg presents a compelling case. The expatriate tax regime is one of several incentives, making it a highly competitive and welcoming destination.
Through this new regime, Luxembourg reinforces its role as a European hub for international talent. By combining tax incentives, administrative simplicity, and a clear legal framework, the modernised system meets the needs of companies facing growing challenges in attracting highly skilled professionals.
It forms part of a broader strategy to encourage the long-term settlement of strategic profiles and support international business development.
For companies or professionals interested in relocating to or doing business in Luxembourg or applying the expatriate tax regime, Kreston can facilitate contact with a local advisor who can assess individual situations and provide tailored guidance throughout the process.
June 25, 2025
The Kreston Charities Report 2025, released by the Kreston UK Charity Group, highlights the growing financial pressures, recruitment challenges, and political uncertainty facing UK charities. Drawing on responses from more than 2,000 organisations across the UK, the report provides vital insight into how charities are coping with rising costs, shifting government policy, and ongoing demands on their services.
This year’s findings reveal that 80% of charities are experiencing pressures on their income streams, with many also facing significant cost increases. Over the past 12 months, 92% of respondents reported wage increases, 61% faced higher energy bills, and 69% experienced increased insurance costs.
Despite these challenges, 63% of charities are exploring options to diversify income streams, such as expanding corporate giving, grants and legacy fundraising. Encouragingly, 85% believe they have the capacity to deliver their required services in 2025 – a testament to the resilience of the sector.
Almost half (44%) of charities report difficulties recruiting and retaining staff, with many increasing salaries and offering flexible or hybrid working to attract employees. However, trustee recruitment remains steadier, though 90% of charities still identify gaps in key areas such as legal, IT, and HR expertise.
While public interest in sustainability continues to rise, most charities (49%) are not increasing their focus on ESG in 2025, citing financial pressures and limited capacity. Nonetheless, many are strengthening governance, with 46% reviewing their risk registers at every board meeting and identifying reduced funding as the biggest emerging risk.
A major shift in sentiment is evident this year, with 81% of charities believing the new Labour government will have a negative impact on their operations – a stark contrast to 2024, when most expected Labour to support the sector. Despite this, 78% say they are keeping up with digital changes, and most have adequate cybersecurity measures in place.
The Kreston Charities Report 2025 highlights the UK’s charitable sector’s determination to adapt and persevere through financial and political uncertainty, continuing to deliver vital services to those most in need.
Read the full Kreston Charities Report 2025 here. If you are a charity and you would like to speak to one of our UK firms, please find your nearest UK office here.
Dr Manuel Vogel is an accomplished finance executive with extensive experience in international tax (in particular international VAT), corporate governance, and financial management. He acts as interim manager (e.g. currently the Chief Financial Officer at DentaCore AG), and is often asked to serve on the Board of Directors as a finance and tax specialist.
May 15, 2025
This is a general guide only and not designed to cover every scenario and the nuances of VAT. Specific advice according to each transaction or supply should always be sought from a VAT specialist.
April 22, 2025
What is transfer pricing?
In simple terms, transfer pricing is the process of setting the prices charged between associated enterprises in cross-border transactions, which can involve transfers of tangible goods, services, and intangible property, as well as financing transactions.
When a cross border transaction occurs between associated enterprises, tax administrations in the respective countries are especially interested to ensure that the taxable profits of multi-national enterprises (“MNEs”) are not artificially shifted out of their jurisdiction and that the tax base reported by MNEs in their country yield results that are consistent with the economic activity undertaken and the results that would have been realized if uncontrolled taxpayers had engaged in the same transaction under the same circumstances.
What are the rules?
Each country has different transfer pricing rules, so it is important to speak to a country tax specialist to make sure you are following local country requirements. With only a few exceptions, most countries’ transfer pricing rules are based on the “arms-length” principle, where pricing between associated enterprises should reflect the prices that would have been realized if uncontrolled taxpayers had engaged in the same transaction under the same circumstances
The OECD has also published transfer pricing guidelines (“OECD Guidelines”) here for member countries and cooperating non-member countries to follow. Most countries’ transfer pricing rules are based on the OECD Guidelines, though there may be certain differences in interpretation, application, and administration among countries.
If the transfer price is not arm’s length, the tax administrator has the authority under the tax jurisdiction regulations to make adjustments by reallocating items of gross income, deductions, credits, or allowances in order to properly reflect income between the entities.
What is an example of transfer pricing?
The following case illustrates various examples of transfer pricing related issues:
A MNE group, ValveCo, is in the business of designing, producing, and selling valves. ParentCo is responsible for design, manufacture, and distribution in its territory. SubCo1 operates as a licensed producer in its jurisdiction (Transaction 1). SubCo1 performs certain development work under the direction of ParentCo (Transaction 2). SubCo1 purchases components from ParentCo to be used in its manufacturing process (Transaction 3). SubCo1 relies on ParentCo for certain management and administrative functions (Transaction 4), as well as funding of its operations (Transaction 5). SubCo2 purchases products from ParentCo and SubCo1 for resale to third-party customers in its jurisdiction (Transaction 6).
Who do the transfer pricing rules apply to?
The transfer pricing rules are relevant to MNEs with controlled transactions among associated enterprises in different tax jurisdictions. Uncontrolled transactions do not fall under transfer pricing rules. A transaction is controlled or enterprises are associated if one enterprise participates in the management, control, or ownership of another enterprise, or if the same people or enterprise participates in the management, control, or ownership of two enterprises (i.e., a situation with common ownership).
Are there exemptions?
A growing number of countries are implementing contemporaneous transfer pricing documentation requirements, meaning the transfer pricing documentation has to be prepared prior to the filing of the tax return for a given accounting period. However, certain jurisdictions do provide documentation exemptions for small and medium-sized enterprises. In addition, a handful of other countries do not require contemporaneous documentation. While these exemptions exist, the burden of proof remains with the taxpayer to demonstrate arm’s-length pricing. This supporting information may still be requested during a transfer pricing examination, and the intercompany pricing may be adjusted by the examiner to reflect an arms-length outcome.
How do you calculate transfer pricing?
As noted above, associated enterprises should price transactions in the same way that uncontrolled entities would price the same transactions under similar circumstances. In short, the arm’s-length principle requires the comparison of controlled transactions with uncontrolled transactions. Hence, transfer prices are calculated through “comparability analysis” or benchmarking analysis. Valid comparables or benchmarks may exist as transactions between an associated enterprise and third parties (i.e., internal comparables). Alternatively, external comparables may be applied in the form of external comparable uncontrolled transactions (where none of the parties involved are members of the MNE group) or independent comparable companies that perform similar functions to one of the associated enterprises (i.e., the tested party). Our transfer pricing specialists can evaluate the specified transfer pricing methods and comparability criteria to identify the most reliable transfer pricing approach for a specific client. For external comparables, our transfer pricing specialists have access to specially licensed databases to conduct our benchmarking research. Please contact your nearest Kreston Global office to assist with your transfer pricing compliance needs.
Is transfer pricing tax evasion?
The objective of transfer pricing rules is to prevent MNEs from arbitrarily shifting income to avoid paying taxes. According to the OECD Guidelines, the consideration of transfer pricing should not be confused with the consideration of problems of tax fraud or tax avoidance, even though transfer pricing policies may be used for such purposes. Application of transfer pricing in accordance with the arm’s-length principle and the preparation of supporting documentation is considered to maintain tax compliance and good practice; failure to do so may result in income adjustments, potential double taxation, interest, and penalties.
How can Kreston Global help my company with transfer pricing?
Kreston firms can help support your company to adhere to country-based transfer pricing rules with the following core services:
Please search for your nearest Kreston Global office here and they can help signpost you to the countries you need support in.
