Key Transfer Pricing Considerations For Startups

Transfer pricing

Startups and entrepreneurship are concepts that have recently grown more important globally. To put it simply, startups are entrepreneurial companies that are generally established to offer solutions to any problem and exhibit rapid growth potential. In many countries, the importance of technology-oriented startup business models is gradually increasing, and a rising number of"unicorns"¹ are emerging. Companies such as Facebook, Twitter, Snapchat, Xiaomi, Airbnb, and SpaceX, each a multinational giant now, were initially startups.

Transfer pricing is tax legislation setting out methods for the pricing of transactions between group companies according to their contributions to the group and relies upon the OECD's "arm's length principle". The sensitivity of tax authorities to the intentional manipulation of pricing among MNEs by group companies and the erosion of countries' tax base is gradually increasing.