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When we hear the term "profit shifting", we often associate it with cross-border transactions between and among members of multinational companies (MNEs) aimed at reallocating profits across different countries or tax jurisdictions to minimise tax liabilities.

When a group of companies work together, each member contributes their unique strengths and skills to achieving common goals through helping each other.

The rampant development of digitalization and globalization in the 21st century brought with it several challenges to the rules for taxing international business income, which gave rise to base erosion and profit shifting (“BEPS”), where multinational entities (“MNEs”) shift profits to locations with minimal or no tax to pay a reduced amount of global taxes.

Today marks the last day of 2024. As we bid farewell to 2024, let me wrap up the key topics and insights discussed in our monthly Let’s Talk TP articles throughout the year. From the implications of BEPS Pillar 2 to the intricacies of intercompany financial transactions, we explore the critical issues surrounding transfer pricing.

The Philippine tax landscape faces a similar turning point, where significant tax amendments are being introduced to allow our tax system to flourish.

Businesses, especially multinational companies that have significant transactions with their related parties, can draw a parallel to the importance of remembering transfer pricing regulations.

According to the Organisation for Economic Cooperation and Development (OECD), the use of a cash pool is popular among multinational enterprises as a way of achieving more efficient cash management by bringing together, either physically or notionally, the balances of a number of separate bank accounts.

Technology is making the world smaller. More countries are linked and interconnected in trade relations, particularly in digital trade, which the Organisation for Economic Co-operation and Development (OECD) Global Trade Forum highlighted would continue to grow, representing around 25% of the total trade as of 2020. Likewise, the World Trade Statistical Review reported that digitally delivered services traded within Asia reached 43.2% of the continent’s total trade in 2021.