Q: Why is there a renewed rigor around application of PSM as most appropriate method?

Kunj Vaidya (Partner and Leader, Transfer Pricing, PwC India)

There is indeed an increased focus on PSM and its application. Tax authorities across the globe have shifted focus and are not only looking at one sided analysis of the transactions that occur in their jurisdiction. Traditional transfer pricing has focused on only the simplest sides of transactions so far, while the entrepreneurial entities and the full value chain received limited review. However, it would change now in view of increasing decentralization of the value chain, disruption of business models, availability of more information on the value chain and global allocation of profits by way of country by country report and master file. These factors could lead to increased focus on PSM by the tax authorities.

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