Artificial Intelligence & Transfer Pricing: Can TP-AI Integration Be Achieved For TP Compliance?

Introduction

The taxation of the digital economy has prompted tax administrations throughout the world to become more aggressive in their efforts to eradicate base erosion and profit-shifting activities conducted by multinational enterprises (MNEs). As a result, there has been a significant increase in transfer pricing (TP) disputes between these MNEs and the respective tax authorities in the jurisdictions in which they operate worldwide, during which the pricing methodologies of the MNEs' related party transactions have been contested. MNEs must, therefore, ensure that they achieve consistency with the arm's length principle in the pricing of their related party transactions, as well as compliance with their respective jurisdictional transfer pricing requirements, in order to achieve favourable dispute resolution involving the payment of little to no additional tax liabilities.