Transfer pricing and business restructuring: strategic aspects for multinational groups

The beginning of the year often represents a crucial moment for the definition of new business development projects. These include, for example, internationalization initiatives, acquisition operations, or value chain reorganization processes. At the same time, it is also the phase in which the first operational activities related to strategic projects planned in the final months of the previous financial year commence.

In an increasingly dynamic and competitive economic context, multinational groups – regardless of their size – are called upon to constantly verify the effectiveness of the strategies adopted. The set objectives, intermediate results, and continuously evolving economic and geopolitical conditions require ongoing monitoring of corporate choices. The pressure exerted by a highly competitive global market therefore necessitates a constant adaptation of operating and business models.

When a group decides to undertake a process of reviewing its operating strategies – commonly defined as business restructuring – it becomes fundamental to carefully analyze the characteristics of its business model within the economic and competitive context in which it operates. Among the most relevant aspects to consider are:

• The redefinition of the functional profile and the risks of the group companies, for example, with a view to greater centralization or, conversely, decentralization of activities;

• The management of intangible assets, including the attribution of research and development activities, the legal protection of the assets created, and the methods of exploiting them both within and outside the group;

• The identification of intercompany transactions affected by the reorganization process and the assessment of the relative effects on individual entities and different business lines;

• The integration into the value chain of companies acquired following M&A operations;

• The revision of profit allocation criteria based on a concrete analysis of the risks associated with the activities actually carried out by the various group entities.

Business restructuring and transfer pricing: a methodological approach

From a business perspective, a reorganization project cannot be limited to the evaluation of the expected economic benefits, both at the group level and for the individual companies involved. It is equally necessary to consider the potential tax risk profiles arising from the operations implemented.

A reorganization involving multiple tax jurisdictions can, in fact, lead to a redistribution of profit rights among the various group companies resident in different countries. This makes it essential to adopt all necessary measures to prevent base erosion or artificial profit shifting.

Reorganization operations, as well as all cross-border transactions between related companies, are governed by the rules on transfer pricing and business restructuring, which apply the arm's length principle (arm’s length principle) developed within the OECD and incorporated into national international tax laws.

Given the complexity of these operations, the OECD Transfer Pricing Guidelines dedicate an entire chapter to this topic (Chapter IX). These indications represent an important methodological reference to ensure alignment between business needs and compliance with tax regulations.

In particular, the analysis of a reorganization process can be divided into several fundamental phases:

1. Analysis of the operation as a whole

The first step consists of identifying and precisely defining the transactions under analysis, comparing the functional profile of the entities involved before and after the reorganization. It is essential to adopt both an ex ante and ex post perspective, evaluating not only the transfer of functions, risks, and assets, but also the remuneration policies for future intercompany transactions resulting from the new organizational structure.

2. Evaluation of economic reasons

Subsequently, it is necessary to analyze in depth the economic and management reasons underlying the reorganization. In this phase, the objectives pursued and the expected benefits are examined, both at the group level and for the individual companies involved. Such analysis is particularly important for identifying any misalignments between the overall strategic advantages and the specific effects on individual entities, which might see their operational role modified.

3. Analysis of “options realistically available”

Since transfer pricing is based on the arm's length principle, it is necessary to evaluate what realistic alternatives would be available to individual companies if they operated as independent entities. In other words, one must ask what the behavior of companies not belonging to the same group would be if they were faced with a similar reorganization. The analysis of the so-called options realistically available (ORA) allows for the evaluation of the pros and cons of the different alternatives and the identification of any compensation or indemnities that make the operation economically advantageous for all parties involved.

4. Analysis of transactions and any remuneration

The final phase is aimed at determining whether, and under what conditions, independent parties would have provided for remuneration in a similar operation. In particular, the analysis focuses on verifying the possible transfer of value elements, such as tangible or intangible assets, contractual rights, or business complexes capable of generating income, as well as the possible renegotiation or termination of existing contracts, both within the group and with third parties.

The role of time and market conditions

In business reorganization processes, both the time dimension and the economic context in which the company operates take on particular relevance. Strategies must, in fact, be evaluated throughout the entire project life cycle, from the planning phase to the full operation of the new organizational structure.

At the same time, external factors such as regulatory changes, commercial policies, or geopolitical events can significantly influence corporate choices. For this reason, multinational groups must maintain constant monitoring of their transfer pricing and business restructuring policies, ensuring their consistency with continuously evolving economic and market conditions.

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