Transfer Pricing and Customs

The Intersection of Two Disciplines

Transfer pricing and customs valuation are two distinct regulatory domains that apply to the same transactions between related companies. Transfer pricing falls under direct taxation (corporate income tax) while customs valuation falls under indirect taxation (customs duties and import VAT). These two disciplines pursue potentially contradictory objectives.

The Fundamental Paradox

• In transfer pricing, the tax authority wants the price to be as low as possible to minimise deductible expenses
• In customs valuation, the customs authority wants the declared value to be as high as possible to maximise duties collected

This tension creates a "double-edged trap" for multinational companies.

Regulatory Framework

Article 70(3) UCC and Article 134 of the Implementing Regulation specifically address related parties. The transaction value may be accepted between related parties if:

• The relationship did not influence the price, or
• The value is close to reference values (test values)

The OECD Transfer Pricing Guidelines and the WCO Technical Committee instruments provide complementary guidance.

Best Practices

Companies should adopt an integrated approach:

• Align transfer pricing policy with customs requirements from the design stage
• Document the methodology for setting intercompany prices
• Anticipate the impact of transfer pricing adjustments on customs value
• Consider advance rulings to secure the declared value