Transfer pricing audits on intragroup services: Where is the burden of proof?

Given the increasing scrutiny of intragroup services in Tanzania and the complex nature of the TP audits, MNEs must be proactive in maintaining detailed, comprehensive documentation to avoid costly penalties. Businesses should ensure that all services rendered are documented, highlighting their legitimacy and benefits. It’s crucial to be prepared with clear evidence to justify the arm’s length nature of these transactions. Furthermore, MNEs should consider utilising Advanced Pricing Arrangements (APAs) to gain more certainty in their transfer pricing practices. According to TP Regulations, taxpayers can request APAs to agree with tax authorities on the treatment of certain related party transactions in advance for a specified period. As it stands, there has been no concluded APA in the country since the introduction of the APA provision in 2018. Therefore, the TRA should provide clear timelines for reviewing APA applications to ensure timely decisions and avoid unnecessary delays.