-
Audit approach overview
Our audit approach will allow our client's accounting personnel to make the maximum contribution to the audit effort without compromising their ongoing responsibilities
-
Annual and short period audit
At P&A Grant Thornton, we provide annual and short period financial statement audit services that go beyond the normal expectations of our clients. We believe strongly that our best work comes from combining outstanding technical expertise, knowledge and ability with exceptional client-focused service.
-
Review engagement
A review involves limited investigation with a narrower scope than an audit, and is undertaken for the purpose of providing limited assurance that the management’s representations are in accordance with identified financial reporting standards. Our professionals recognize that in order to conduct a quality financial statement review, it is important to look beyond the accounting entries to the underlying activities and operations that give rise to them.
-
Other Related Services
We make it a point to keep our clients abreast of the developments and updates relating to the growing complexities in the accounting world. We offer seminars and trainings on audit- and tax-related matters, such as updates on Accounting Standards, new pronouncements and Bureau of Internal Revenue (BIR) issuances, as well as other developments that affect our clients’ businesses.
-
Tax advisory
With our knowledge of tax laws and audit procedures, we help safeguard the substantive and procedural rights of taxpayers and prevent unwarranted assessments.
-
Tax compliance
We aim to minimize the impact of taxation, enabling you to maximize your potential savings and to expand your business.
-
Corporate services
For clients that want to do business in the Philippines, we assist in determining the appropriate and tax-efficient operating business or investment vehicle and structure to address the objectives of the investor, as well as related incorporation issues.
-
Tax education and advocacy
Our advocacy work focuses on clarifying the interpretation of laws and regulations, suggesting measures to increasingly ease tax compliance, and protecting taxpayer’s rights.
-
Business risk services
Our business risk services cover a wide range of solutions that assist you in identifying, addressing and monitoring risks in your business. Such solutions include external quality assessments of your Internal Audit activities' conformance with standards as well as evaluating its readiness for such an external assessment.
-
Business consulting services
Our business consulting services are aimed at addressing concerns in your operations, processes and systems. Using our extensive knowledge of various industries, we can take a close look at your business processes as we create solutions that can help you mitigate risks to meet your objectives, promote efficiency, and beef up controls.
-
Transaction services
Transaction advisory includes all of our services specifically directed at assisting in investment, mergers and acquisitions, and financing transactions between and among businesses, lenders and governments. Such services include, among others, due diligence reviews, project feasibility studies, financial modelling, model audits and valuation.
-
Forensic advisory
Our forensic advisory services include assessing your vulnerability to fraud and identifying fraud risk factors, and recommending practical solutions to eliminate the gaps. We also provide investigative services to detect and quantify fraud and corruption and to trace assets and data that may have been lost in a fraud event.
-
Cyber advisory
Our focus is to help you identify and manage the cyber risks you might be facing within your organization. Our team can provide detailed, actionable insight that incorporates industry best practices and standards to strengthen your cybersecurity position and help you make informed decisions.
-
ProActive Hotline
Providing support in preventing and detecting fraud by creating a safe and secure whistleblowing system to promote integrity and honesty in the organisation.
-
Accounting services
At P&A Grant Thornton, we handle accounting services for several companies from a wide range of industries. Our approach is highly flexible. You may opt to outsource all your accounting functions, or pass on to us choice activities.
-
Staff augmentation services
We offer Staff Augmentation services where our staff, under the direction and supervision of the company’s officers, perform accounting and accounting-related work.
-
Payroll Processing
Payroll processing services are provided by P&A Grant Thornton Outsourcing Inc. More and more companies are beginning to realize the benefits of outsourcing their noncore activities, and the first to be outsourced is usually the payroll function. Payroll is easy to carve out from the rest of the business since it is usually independent of the other activities or functions within the Accounting Department.
-
Our values
Grant Thornton prides itself on being a values-driven organisation and we have more than 38,500 people in over 130 countries who are passionately committed to these values.
-
Global culture
Our people tell us that our global culture is one of the biggest attractions of a career with Grant Thornton.
-
Learning & development
At Grant Thornton we believe learning and development opportunities allow you to perform at your best every day. And when you are at your best, we are the best at serving our clients
-
Global talent mobility
One of the biggest attractions of a career with Grant Thornton is the opportunity to work on cross-border projects all over the world.
-
Diversity
Diversity helps us meet the demands of a changing world. We value the fact that our people come from all walks of life and that this diversity of experience and perspective makes our organisation stronger as a result.
-
In the community
Many Grant Thornton member firms provide a range of inspirational and generous services to the communities they serve.
-
Behind the Numbers: People of P&A Grant Thornton
Discover the inspiring stories of the individuals who make up our vibrant community. From seasoned veterans to fresh faces, the Purple Tribe is a diverse team united by a shared passion.
-
Fresh Graduates
Fresh Graduates
-
Students
Whether you are starting your career as a graduate or school leaver, P&A Grant Thornton can give you a flying start. We are ambitious. Take the fact that we’re the world’s fastest-growing global accountancy organisation. For our people, that means access to a global organisation and the chance to collaborate with more than 40,000 colleagues around the world. And potentially work in different countries and experience other cultures.
-
Experienced hires
P&A Grant Thornton offers something you can't find anywhere else. This is the opportunity to develop your ideas and thinking while having your efforts recognised from day one. We value the skills and knowledge you bring to Grant Thornton as an experienced professional and look forward to supporting you as you grow you career with our organisation.
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. Profit shifting enables businesses to move profits from high-tax jurisdictions to low-tax or no-tax areas to reduce the total tax liabilities of a conglomerate or a corporate group. While this strategy may be used to somehow avoid tax, it raises concerns about the fairness of tax computations and huge government revenue losses, resulting in a greater need for stricter regulations to ensure proper payment of taxes.
Although profit shifting often involves intercompany transactions among MNEs, it is not solely an international practice, as it can also occur within a single country. In some cases, businesses take advantage of tax incentives granted to certain industries or areas or engage in intercompany transactions among parent/holding companies, subsidiaries, and affiliates or entities under common ownership to unduly improve their tax positions.
The Bureau of Internal Revenue (BIR) acknowledged this risk and raised that while transfer pricing issues typically occur in cross-border transactions, they can also occur in domestic transactions. The BIR illustrated how domestic transfer pricing issues may arise when income is shifted from a company subject to regular income tax to a related company enjoying special tax privileges such as Board of Investments (BOI) incentives and Philippine Economic Zone Authority (PEZA) fiscal incentives. Similarly, expenses from a tax-incentivised entity may be transferred to a related company subject to regular income taxes, or income and expenses may be strategically allocated between related parties to reduce a group’s tax liabilities.
This practice of domestic profit shifting can take many forms, often involving intercompany transactions that manipulate income and expenses to achieve tax avoidance. Businesses may engage in below-market or unreasonably high transfer pricing. These strategies allow companies to shift profits to entities enjoying lower tax rates or tax exemptions, which results in minimisation or total elimination of tax liabilities.
Common Ways of Domestic Profit Shifting
1. Transfer of Goods and Services Among Related Parties
When a company sells goods or services to a related party at prices below market value or nothing is charged at all, particularly when the purchasing entity operates in a tax-incentivised zone, such as an economic zone, the selling party reports lower taxable income, while the purchasing party benefits from tax exemptions or reduced tax rates, resulting in a lower consolidated tax liability.
2. Management, Consultancy, IT, Finance, Audit, and Other Back-Office Support
A tax-incentivised service provider may charge unreasonably high fees for management, consultancy, IT, finance, audit, and other back-office services to its related parties, which the latter recognizes as deductible expenses. This reduces their taxable income while the service provider records a higher income, which may be tax-exempt or subject to a lower preferential tax rate, diminishing the total tax liability of the group.
3. Lease Agreements Between Related Parties
When a business rents real estate or equipment from an affiliated company at inflated rental rates, the leasing entity, if located in a tax-incentivised area, can report overpriced rental income, while the lessee claims the rent as a deductible expense, thereby lowering its taxable income.
4. Income and Cost Allocation Within a Corporate Group
This normally occurs when a corporate group with multiple business units incurring shared expenses allocates a higher portion to entities subject to regular income tax rates while directing more revenue to entities enjoying tax incentives. With this practice, the company reduces taxable income where higher tax rates apply while increasing taxable income where lower tax rates apply.
5. Shifting Income to Entities with Unutilized and Expiring Tax Credits
Allocating more income to entities with unutilised and/or expiring tax credits, such as net operating loss carryovers (NOLCO), creditable withholding taxes, prior-year excess credits, excess minimum corporate income tax over regular corporate income tax, tax credit certificates, and other tax credits, allows businesses to utilise these tax benefits to lower the taxes due. By shifting income to a related company with available tax credits, the group ensures that these credits are fully utilised before they expire, which results in the offsetting of taxable income and lowering tax obligations. Meanwhile, the related entity incurring the corresponding expense reports an understated taxable income, further diminishing its tax liability.
Regulatory Response and Compliance Measures
These examples are just some of the methods of how businesses engage in domestic profit shifting. Conglomerates or corporate groups engaged in different industries may take advantage of intercompany transactions to strategically minimise the tax obligations of the whole group.
Recognizing the impact of these practices on government revenues, the BIR has implemented regulations aimed at detecting and minimising such activities. As a countermeasure, the BIR has begun closely examining transactions between related parties, particularly those involving significant expense allocations or income shifting. If an expense appears excessive or unwarranted, or does not meet the arm’s-length principle, meaning it was not incurred under fair market conditions between unrelated entities, the BIR has the authority to disallow the deduction.
Some companies may unknowingly engage in these practices and not fully understand their tax implications, or the potential risks involved. In many cases, intercompany transactions are structured based on business needs, with little consideration of how they might be viewed from a tax compliance perspective. Nevertheless, the BIR continues to strengthen and advance its monitoring and enforcement efforts to identify transactions that result in undue tax minimisation, whether intentional or not. Failure to properly assess and document the rationale behind intercompany pricing and expense allocations can lead to tax deficiencies, penalties, and disallowed deductions, potentially causing significant financial losses for businesses.
Importance of Proper Transfer Pricing Documentation (TPD)
This is why maintaining proper TPD is crucial, even for companies that are not explicitly required by law to prepare such reports. Proper documentation serves as a safeguard, ensuring that all intercompany transactions are conducted at arm’s length and reflect fair market value. It provides transparency in pricing policies and helps justify the reasonableness of income and expense allocations, as well as the factors considered in setting prices between related entities. TPD assists in minimising the risk of penalties, disallowed deductions, and tax adjustments that could arise from perceived profit shifting.
While profit shifting may offer short-term tax advantages, it comes with the risk of scrutiny, tax deficiencies, and penalties.
Let's Talk TP is an offshoot of Let’s Talk Tax, a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.
As published in BusinessWorld, dated 25 March 2025