Navigating the Future of Transfer Pricing: Key Updates and Compliance Strategies for 2025

Transfer Pricing remains a cornerstone of international tax compliance, and as we approach 2025, significant updates are on the horizon. With proposed methodologies, evolving tariff structures, and regulatory changes reshaping the landscape, staying informed has never been more critical. For tax professionals, taxpayers, or leaders of multinational businesses, understanding these developments is key to navigating compliance, minimizing risks, and optimizing global tax strategies.

During the 2024 presidential campaign, Donald Trump emphasized his intention to implement tariffs on Mexico, Canada, and China as a priority upon taking office. Following his victory in the 2024 election, he has provided more specific details regarding the proposed tariffs. Trump has stated that he plans to impose a 25% tariff on products imported from Mexico and Canada, and an additional 10% on products imported from China.

If President-elect Trump follows through on these campaign promises, then imports from these countries will see an increase in customs duties starting January 20, 2025. Strategic planning is essential to effectively mitigate the impact of these additional tariffs. Key considerations include revisiting intercompany pricing models, adjusting supply chain structures, and exploring alternative sourcing options to reduce dependency on high-tariff jurisdictions. Businesses should also focus on maintaining robust documentation and analysis to substantiate pricing arrangements and mitigate audit risks. By aligning transfer pricing policies with these new trade realities, organizations can navigate the challenges posed by increased tariffs and compliance requirements while remaining competitive in a shifting global market.

Another important item for taxpayers to consider when planning their transfer pricing documentation and transactional structure is the newly proposed Simplified and Streamlined Approach (SSA). The SSA marks an interesting development, being the first OECD guidance directly incorporated into U.S. domestic tax regulations. It can be applied as a safe harbor for tax years beginning on or after January 1, 2025.

The SSA eliminates the need for comparable benchmarking, making it appealing to taxpayers looking to reduce their Transfer Pricing documentation burden. However, while this may seem advantageous, it introduces a multi-step analysis process that can prove burdensome in other respects. It’s also worth noting that while benchmarking requirements are alleviated, all other transfer pricing documentation requirements remain in effect. When selecting the appropriate transfer pricing methodology, it is crucial to carefully evaluate all relevant factors and documentation requirements.

The benchmarking of intangible transactions has long been a challenging area for taxpayers due to the unique nature of intangible assets and the difficulty in finding comparable market data. These assets—including patents, trademarks, brand value, and proprietary technology—often lack direct comparables, making it difficult to apply traditional transfer pricing methodologies. This complexity is further heightened by evolving regulatory standards and the increasing scrutiny placed on intangible transactions by tax authorities worldwide. With new considerations set to emerge in 2025, including adjustments to valuation techniques and proposed tariffs, the benchmarking of intangibles is more complex than ever. Consequently, the stakes for businesses to ensure compliance and implement robust, defensible transfer pricing policies for intangible assets have never been higher.

If you have any questions or concerns about how these changes may affect your client’s operations, please contact our Global Business Services team.