Transfer Pricing in 2025: What businesses need to know
January 30, 2025
Transfer pricing in 2025 will be defined by stricter global regulations, enhanced tax scrutiny, and the increasing role of technology in compliance. In an article for International Tax Review, Martin Bonner and Yiwen Ping of Kreston Global outline how key developments from 2024—including Pillar Two, Amount B, and the Apple v EU Commission ruling—will influence multinational enterprises in the year ahead.
Key global Transfer Pricing trends
Pillar Two: Global Minimum Tax implementation
The rollout of Pillar Two in 2024 introduced a 15% minimum tax for multinationals earning over €750 million annually. A major shift in the framework was the expansion of permanent establishment (PE) definitions, including the introduction of “stateless” PEs. This means businesses must carefully assess economic substance to avoid disputes over profit allocation.
Amount B: Standardisation with challenges
The OECD’s final report on Amount B was released in February 2024, aiming to simplify transfer pricing for routine distribution activities. While intended to streamline compliance, its qualitative criteria leave room for interpretation, creating potential inconsistencies across jurisdictions. Businesses must proactively assess eligibility to benefit from reduced documentation requirements.
Apple v EU Commission: Economic Substance under scrutiny
The landmark Apple v EU Commission ruling reinforced the importance of aligning profit allocation with actual business functions and risks. The case highlights increased scrutiny on mismatches between legal ownership and operational control, urging companies to refine their transfer pricing policies to withstand regulatory challenges.
Regional Transfer Pricing developments
Germany: Stricter compliance deadlines
Germany introduced tighter transfer pricing documentation requirements in 2024, reducing the deadline for submitting master and local files to just 30 days. This underscores the urgency for companies to maintain well-organised documentation and compliance processes to avoid penalties.
China: Digitalisation and transparency in taxation
China has positioned itself as a leader in digital tax administration. Its nationwide electronic tax system integrates real-time data processing, enhancing tax authorities’ ability to scrutinise transfer pricing practices. Additionally, China’s push for greater transparency includes new fair competition rules aimed at reducing selective tax incentives.
Technology and the future of Transfer Pricing compliance
Tax administrations worldwide are leveraging AI, big data, and blockchain to enhance risk assessments and regulatory enforcement. Businesses must invest in automation and robust data management systems to meet evolving compliance expectations.
Preparing for Transfer Pricing in 2025
With increasing regulatory complexity, businesses must take a proactive approach to transfer pricing in 2025. Aligning with global tax reforms, enhancing digital capabilities, and ensuring compliance with new reporting standards will be critical to managing risks and optimising tax strategies in the coming months.
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