Transfer Pricing and Business Restructurings

S. 1Introduction to Business Restructuring

Abhishek Padwalkar

S. 21. Introduction

The changes in economic and social landscapes impact businesses and individuals alike. In order to adapt to fluctuations in the global marketplace, improve operational efficiency, reduce costs, and optimize financial performance, businesses would need to reorganize to create the right structure to meet some of these challenges. From an economic perspective, business restructuring can enable multinational enterprises (MNEs) to realign their operations, assets, and resources to better match changing market conditions and customer needs. The movement of functions, personnel, assets, and risks within an MNE can enhance their flexibility and agility thereby allowing them to respond more quickly and effectively to modifications in the business environment. From a financial perspective, business reorganization can help MNEs optimize their capital structure, reduce costs, and improve profitability. The economic and financial analysis would be factored in even for the purpose of a transfer pricing (TP) analysis.

Regarding TP, business restructuring can be a minefield of complexity and uncertainty. As MNEs reorganize their...