New markets pose growing challenge.

• Author: Marshall, Jeffrey
• Position: New transfer pricing

A strong and growing increase in cross-border business investment by multinational corporations in Mexico, Eastern Europe and Asia--notably in China and India--presents new transfer pricing challenges. That's true both in the countries receiving investments and in the former operating jurisdictions, finds a new survey by Ernst & Young.

Transfer pricing involves the price at which transactions between units of multinational companies take place, including the inter-company transfer of goods, property, services, loans and leases.

More than 20 percent of respondents to the Ernst & Young 2005-2006 Global Transfer Pricing Survey reported either new or relocated manufacturing operations in the past two years. Thirty-five percent of the survey respondents identified China as the leading relocation destination.

Key findings of the survey include:

* 38 percent of respondents list transfer pricing as the most important item on the agendas of their corporate tax directors.

* Approximately 70 percent of respondents believe transfer pricing documentation is more important today than two years ago.

* An increased level of transfer pricing audit activity, with 65...