Intangible assets and digital interactions are blurring the lines of traditional value chains. Identifying and allocating value creation in this digital realm poses new challenges for Transfer Pricing. Consider the value created by algorithms, data, and digital platforms – how do we accurately price these in intercompany transactions?

Digitalisation is changing the traditional business models also in the financial sectors (e.g. banking, asset management, insurance). Fintech and insurtech are characterized for reaching more clients through apps and web sites, for developing new IP it-based, for elaborating big data through AI to develop personalised products. All these aspects can modify the traditional functional/risk profiles of incumbents and can require a different functional set up for start-ups. Centraling functions typically operated locally (e.g., distribution of products), IP remuneration, development of personalised products are aspects to analyse to see where the value is created and to check if the tp policies are still valid or have to be modified.

1) Digitisation/Use of Technology: this is a 'game changer' factor that can provide valuable support in day-to-day management of intercompany policies associated with the various transactions (reference is made to OTP processes). 2) ESG/CSR Compliance: ESG compliance requires MNEs to review their organisation as well as their transfer pricing policies (e.g. changes and/or adaptations of the existing business model/supply chain; increased costs associated with new products/services and/or savings; development of new products/processes development and/or enhancement of intangibles; changes in profitability brought about by new processes/products/costs, participation in new regulatory or trading regimes (carbon credits)). 3)

Digitalization makes it harder to clearly distinguish where value is created versus where it is captured. For example, a digital company may develop intellectual property in one country, store user data in another, and market its products globally. This complexity poses challenges in determining how to allocate profits and risks across different functions and geographic locations.

The OECD's proposals, including Pillar One and Pillar Two of the BEPS 2.0 framework, aim to establish a minimum global corporate tax rate and reallocate taxing rights to market jurisdictions, where companies' customers are based. This could fundamentally change the global tax landscape by limiting the ability of MNEs to engage in aggressive tax planning and shifting profits to low-tax jurisdictions.

The Base Erosion and Profit Shifting (BEPS) Project continues to cast its net, demanding greater transparency and consistency in Transfer Pricing practices. Country-by-Country Reporting and Advance Pricing Agreements (APAs) are becoming increasingly crucial to navigating the global tax landscape.

Nowadays, it is rather the avoidance of double taxation than the desire to save some percentage points of taxes with artificial tax structures (that likely do not survive a prudent tax audit anyway). Therefore, the relevance of the OECD guidelines as a try to develop and spread some sort of a consensus that allows tax payers to have a starting point to apply the correct mechanisms (eg transfer pricing methods) that are not only in line with the headquarters local regulations but also allows for some degree of robustness in the jurisdictions of other group entities as well. Consistency is key and it needs some sort of common ground to keep the efforts of a multinational group to comply with all regulations (to the best extent possible).

The pandemic's impact on supply chains, profitability, and business models has shaken the Transfer Pricing world. Restructuring, remote work, and digitalization raise questions about arm's length pricing and transfer of intangibles. Adapting practices to this new reality requires careful consideration and robust documentation.

Technological advancements are revolutionizing Transfer Pricing analysis. Automation tools and data analytics can streamline data collection, identify pricing discrepancies, and optimize decision-making. However, the human element remains crucial: interpreting data, navigating legal complexities, and building robust Transfer Pricing policies require skilled professionals.

Managing various cost centre data and allocating costs to related service recipients in complex MNE structure could be resolved with data analytics through raw data collection, structured data presentation and interactive dashboard features.

Automation tools help tax teams, business units, and external advisors work together more effectively. By organizing all transfer pricing documents in one place, these tools make it easier for teams in different regions where the MNC is operation, to stay on the same page and apply the same policies. It also improves interactions with external groups like tax authorities, who are increasingly using digital data to check if companies are following the rules.

As a transfer pricing professional, it will be helpful for you to have strong analytical skills to extract useful information from complex business data to determine existing transfer pricing and indirect tax opportunities and exposures.

Even though transfer pricing is a topic that considers and includes all relevant processes within a business (not only takes snapshots from certain functions), the amount of experts in the market is rather limited. This is particularly because of the required level of experience that experts need to gain before being able to assess individual cases prudently. As this experience can only be gathered in very large consultancies, one finds experts typically in the big4 environment. Inhouse experts are often ex-big4 consultants as they are a very good place for learning. Only very large companies can afford hiring single purpose experts (eg TP mangers). Training junior staff requires a lot of experience (content wise and in leadership).

Apart from the technical details (which is given), TP professionals need to think strategically. Their decisions affect not only taxes but also supply chains, resource use, and overall business plans of the MNCs. They must ensure that pricing policies align with company goals, like expanding into new markets or cutting costs, making their role crucial in business decisions. They should be ready to explain and defend their strategies to tax authorities, auditors, and company leaders. In today's world, TP professionals aren't just tax experts—they play a key role in helping MNCs succeed in a complex global environment.