Transfer Pricing: A Practical Guide for Growing Groups

The Growing Relevance of Transfer Pricing

Transfer pricing rules generally apply to larger multinational groups exceeding  defined revenue, balance sheet and head count thresholds. However, as some businesses expand across jurisdictions, questions may begin to arise around the pricing of intercompany transactions and the rationale behind them, including under domestic general anti abuse tax provisions. While formal reporting may not yet apply, consistency in how related -party pricing is handled can still attract attention from tax authorities, especially where profitability varies across entities, that does not prima facie tally with headcount. Taking steps early on can help reduce the risk of future enquiries and ensure that internal pricing reflects commercial terms.

Common Gaps in Growing Groups

Businesses in growth mode often encounter a number of transfer pricing blind spots. Intercompany arrangements may evolve organically without documentation or formal policies in place. In some cases, pricing decisions may be driven by operational convenience rather than alignment with market terms. Without supporting information, these transactions could raise questions if ever reviewed by tax authorities.

Another common issue is the absence of internal processes for tracking or reviewing related-party transactions. As the business grows more complex, these gaps can result in inconsistencies in reporting and reduced oversight of cross-border arrangements.

Practical Steps to Consider

It’s useful to introduce basic transfer pricing discipline as early as possible. The first step in such an exercise involves identifying all related-party transactions, understanding which entity does what, which entity assumes the risks and which party owns and uses the assets involved in the intra-group transaction. Once the functional analysis is concluded and the transaction is delineated, attention should focus on establishing how such transaction is priced vis a vis similar transactions which are outside of a controlled environment. Even in the absence of full documentation, maintaining an internal record of the business rationale behind pricing decisions is a valuable step.

Benchmarking data can offer support even at an early stage. Using public data sources or industry norms provides a point of reference, particularly for services or financing arrangements. Businesses should also consider setting up a process to review intercompany transactions periodically to confirm they continue to reflect commercial reality.

Seeking advice during this phase of growth can also be helpful. An initial transfer pricing review may highlight points to address or improve. More importantly, it allows businesses to introduce scalable documentation practices that remain fit for purpose as operations expand.

Long-Term Considerations

Adopting a structured approach to transfer pricing reduces the risk of tax audit issues, particularly as the group becomes subject to formal documentation requirements. It also ensures that pricing policies are commercially sound and in line with wider financial planning. Importantly, it encourages internal clarity and forward planning at a time when international tax scrutiny is on the rise.

Transfer pricing compliance may not yet be a legal requirement for every group, but taking early action can reduce future complications. By introducing simple policies and reviewing arrangements regularly, growing businesses can strengthen their reporting and decision-making processes while being better placed to meet regulatory expectations as they arise. 

How We Can Help

At BDO Malta, we assist growing groups in reviewing their present and prospective transfer pricing exposure and developing approaches suited to their operations. Whether you're documenting your first intercompany arrangements or expanding across jurisdictions, we provide clear and practical support throughout the process.


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