Transfer Pricing After BEPS: Substance, Financial Transactions and Dispute Resolution

From left to right, Mr. Sam Sim, Mr. Ziad Rahman, Prof. David Rosenbloom, and Dr René Matteotti

Transfer pricing is often presented as a question of price: what would independent parties have charged for the same transaction?

Yet some of the most difficult transfer pricing questions arise before a number is ever calculated. What is the transaction actually taking place between the parties? Who performs the economically significant functions? Who makes and controls the relevant decisions? Who bears the risks in substance rather than merely on paper? And, when those propositions are challenged years later, what evidence exists to demonstrate what really happened?

These questions ran through Session 2: Transfer Pricing of Tax Academy of Singapore's Masterclass with Professor David Rosenbloom and Professor Dr René Matteotti, held from 31 August to 2 September 2026. The session was led by Professor Dr René Matteotti of the University of Zurich and Mr Sam Sim from STARI, and examined transfer pricing through a comparative Singapore–Switzerland lens, alongside recent international developments, financial transactions, dispute resolution and major cases.

One theme emerged repeatedly: modern transfer pricing is increasingly an exercise in connecting the legal arrangement, the economic reality and the evidence into one coherent account of how value is created and how risks are actually managed.

Accurate delineation comes before the price

A central point made by Professor Matteotti was that transfer pricing analysis involves two logically distinct stages. The first is the accurate delineation of the controlled transaction. Only after the transaction has been properly understood should the appropriate transfer pricing method and arm's length outcome be determined.

This distinction became more important through the BEPS project. OECD work under BEPS Actions 8–10 sought to align transfer pricing outcomes more closely with value creation, including by scrutinising arrangements in which contractual allocations of assets or risks were not fully reflected in the actual conduct and capabilities of the entities concerned. The OECD Transfer Pricing Guidelines remain the principal international framework for applying the arm's length principle to cross-border transactions between associated enterprises.

The session explored what this means in practice.

A contract may state that an entity bears a particular risk. But who actually decides whether to take that risk? Who has the capability to assess it and respond to it? Who monitors it? Does the entity have the financial capacity to assume it? If the conduct of the parties does not correspond with the contractual allocation, the written agreement cannot by itself resolve those questions.

Similar difficulties arise with intangibles. Legal ownership remains relevant, but the discussion emphasised the importance of understanding where the functions associated with the development, enhancement, maintenance, protection and exploitation of intangibles are actually performed.

This can make functional analysis considerably more demanding than simply identifying who provides the final approval. A senior executive may formally sign a decision, while substantial analysis, recommendations and economically significant work were undertaken elsewhere. Conversely, the existence of a large team does not automatically demonstrate that the entity controlled the economically significant risks.

The discussion therefore repeatedly returned to evidence. Organisations need to be able to demonstrate the decision-making process, not simply describe it after the event.

The same principle applies to comparability analysis. Perfect comparables are often unavailable, particularly across different geographic markets. Where compromises or adjustments are necessary, a defensible analysis should explain the search process, the alternatives considered and why the eventual method and comparables were selected.

The broader lesson is that an arm's length result should follow a chain of reasoning:

A benchmark at the end cannot compensate for weaknesses earlier in that chain.

For hub structures, substance is an operating question

The comparison between Singapore and Switzerland gave the discussion particular relevance to multinational groups operating through international business hubs.

The issue is not simply whether a company has "substance" in the abstract. The more difficult question is whether the functions performed, decisions made, risks controlled and returns earned by the entity are mutually consistent.

This became especially clear when Mr Sam Sim turned the discussion to financial transactions and treasury functions.

The OECD's transfer pricing guidance on financial transactions addresses areas including intra-group loans, cash pooling, hedging, financial guarantees and captive insurance. Singapore's current IRAS Transfer Pricing Guidelines similarly address these transactions and require taxpayers to accurately delineate the financial transaction before determining the arm's length remuneration.

Cash pooling provides a useful illustration.

A cash-pool leader could perform a relatively limited coordination or administrative function. In another group, the treasury centre may undertake considerably more sophisticated liquidity management, risk assessment and decision-making. Those two arrangements should not automatically produce the same remuneration merely because both entities are called "cash-pool leaders".

The session also considered credit ratings, implicit group support, financial guarantees and the commercial circumstances surrounding related-party loans. These reinforce a wider point: analysing the interest rate is only part of the exercise. The underlying financing arrangement itself must first make commercial and economic sense.

For hub entities, therefore, substance is not established by a label, an organisational chart or headcount alone. It is demonstrated through what people actually do, the authority they exercise, the risks they control and the business rationale for locating those functions there.

Transfer pricing is interacting with a wider international tax architecture

Another theme was that transfer pricing can no longer be considered in isolation from other parts of the international tax system.

Professor Matteotti traced this development from BEPS 1.0 through Pillar Two and more recent OECD and United Nations work.

Pillar Two is particularly revealing. Traditional transfer pricing seeks an arm's length allocation of income from related-party transactions. The GloBE rules, by contrast, introduce a jurisdictional minimum-tax architecture. The two systems have different mechanics, but they now operate alongside each other.

The OECD's January 2026 Side-by-Side package introduced, among other measures, a Side-by-Side Safe Harbour for MNE groups headquartered in jurisdictions with an eligible regime. The OECD states that the safe harbour exempts eligible groups from the Income Inclusion Rule and Undertaxed Profits Rule in other jurisdictions while leaving Qualified Domestic Minimum Top-up Taxes unaffected. Singapore has stated that it will implement the Side-by-Side package in accordance with the Inclusive Framework agreement. (See: Global Anti-Base Erosion Model Rules (Pillar Two) ↗ (opens in new tab)).

Singapore had already implemented its Multinational Enterprise Top-up Tax and Domestic Top-up Tax for financial years beginning on or after 1 January 2025. (See: Registration for Multinational Enterprise Top-up Tax and Domestic Top-up Tax ↗ (opens in new tab)).

The session's significance for transfer pricing was not that Pillar Two replaces the arm's length principle. Rather, multinational groups increasingly have to understand how transaction-level transfer pricing outcomes coexist with a broader system of minimum taxation.

Recent OECD work on intra-group services provides another example of this changing environment.

The OECD released proposed revisions to Chapter VII of the Transfer Pricing Guidelines for public consultation in June 2026. The OECD expressly states that the revisions are not intended to change the general principles underlying the transfer pricing analysis of intra-group services. However, the consultation draft contains considerably more detailed illustrations and recognises circumstances in which the transactional profit split method may be appropriate—for example, where both parties make unique and valuable contributions, their operations are highly integrated, or they share economically significant risks. Public comments on the draft were published on 24 August 2026, with a consultation meeting planned for November (See: Public consultation on taxation: Revisions to Chapter VII of the OECD Transfer Pricing Guidelines ↗ (opens in new tab)).

This distinction mattered in the session. Practices that have historically gravitated towards cost-based remuneration for services may need a more explicit demonstration of why that remains the most appropriate method in the particular circumstances. Importantly, the consultation document remains a proposal, not final revised guidance.

The discussion also considered the United Nations' 2025 guidance on transfer pricing in the pharmaceutical industry. The UN publication maps the industry's global value chain and applies established transfer pricing concepts, including accurate delineation, to industry-specific functions and value drivers (See: United Nations: Transfer Pricing in the Pharmaceutical Industry ↗ (opens in new tab)).

Professor Matteotti suggested that such sector-focused guidance could enable tax administrations, particularly in developing countries, to ask more informed questions of pharmaceutical multinational groups. That was presented as a forward-looking expectation rather than an established outcome.

Finally, the session considered the OECD's 2025 Model Tax Convention update on extractive industries. The update introduces an alternative treaty provision creating a lower permanent-establishment threshold for certain activities associated with the exploration and exploitation of extractible natural resources, strengthening source-country taxing rights where the provision is adopted bilaterally. (See: OECD updates Model Tax Convention to reflect rise of cross-border remote work and clarify taxation of natural resources ↗ (opens in new tab)).

Taken together, these developments illustrate a broader trend: transfer pricing remains grounded in the arm's length principle, but the environment in which it operates is becoming more interconnected.

Dispute resolution starts with dispute prevention

The session also challenged the idea that transfer pricing controversy begins when an audit letter arrives.

By that stage, many of the most important facts have already occurred.

Employees may have moved. Decision-makers may no longer remember why an arrangement was structured in a particular way. Contracts may not have been updated as business operations evolved. Records explaining why one transfer pricing method was selected over another may be incomplete.

For that reason, documentation was treated throughout the discussion not merely as a compliance exercise, but as part of dispute preparedness.

Useful evidence can include the commercial rationale for the transaction, contemporaneous decision records, contracts that remain aligned with actual operations, a clear functional analysis and a documented roadmap explaining the selection of the transfer pricing method and comparables.

Formal dispute-prevention mechanisms can also play a role.

In Singapore, an Advance Pricing Arrangement (APA) allows IRAS and the taxpayer, or the relevant treaty partners, to agree in advance on criteria for determining the pricing of specified related-party transactions. IRAS itself notes that APAs can be time-consuming and resource-intensive, and that a unilateral APA provides less certainty than a bilateral or multilateral APA because a foreign tax authority is not bound by it (See: IRAS: Advance Pricing Arrangements (APAs) ↗ (opens in new tab))

Where taxation has already arisen that may not accord with a tax treaty, the Mutual Agreement Procedure (MAP) provides a mechanism for the relevant competent authorities to seek resolution (See: IRAS: Mutual Agreement Procedure and Arbitration ↗ (opens in new tab))

The discussion nevertheless recognised that APAs and MAPs are not universal solutions. Their usefulness depends on the transaction, jurisdictions involved, materiality, available treaty mechanisms and the costs and uncertainty of pursuing the process.

The more durable principle is therefore preventative: a multinational group should be able to explain its transfer pricing position coherently before it needs to defend it.

Major disputes show different facts but recurring questions

The session concluded by examining several major disputes and settlements.

The BHP and Rio Tinto Singapore marketing-hub disputes provide particularly relevant examples for a Singapore audience.

Both involved Australian commodities sold through Singapore-based marketing operations and disputes with the Australian Taxation Office over the taxation of those arrangements.

BHP settled its transfer pricing dispute with the ATO in 2018, covering the 2003–2018 income years and agreeing to approximately A$529 million of additional tax (See: BHP settles longstanding transfer pricing dispute ↗ (opens in new tab)).

Rio Tinto subsequently reached agreements with both the ATO and IRAS in 2022 covering transfer pricing relating to its Singapore commercial centre for 2010–2021. Rio Tinto disclosed A$613 million of additional tax under the broader Australian settlement, in addition to A$378 million already paid in respect of original amended assessments. The parallel arrangements with the ATO and IRAS were intended to ensure that the group was not subject to double taxation. (See: Rio Tinto settles all tax disputes with Australian Tax Office ↗ (opens in new tab))

These are settlements rather than judicial transfer pricing precedents. Their importance for the session lay instead in the questions they illustrate: what economically significant contribution is made by the hub? Where are commercial relationships and decisions managed? What remuneration follows from those functions? And is the group's explanation supported by its actual operations?

The Singapore Telecom Australia Investments litigation placed related-party financing under a different form of scrutiny. In March 2024, the Australian Taxation Office succeeded before the Full Federal Court in litigation concerning interest deductions on related-party financing associated with the acquisition of Optus. The High Court of Australia subsequently refused special leave to appeal in October 2024 (See: ATO: ATO successful in SingTel case). ↗ (opens in new tab)

The discussion used the case to explore the commerciality of financing terms and the importance of analysing how an arrangement changes over time, rather than treating an intra-group loan as something that can simply be established and forgotten.

A Spanish Bunge Ibérica cash-pooling dispute brought the discussion back to treasury functions. An official summary of the 2023 Audiencia Nacional decision records disputes over whether the group's credit rating should be used for comparability purposes and whether asymmetric interest rates for debit and credit positions in the cash pool were appropriate (See: Audiencia Nacional Memoria 2023). ↗ (opens in new tab)

In discussing the case, participants focused on the wider functional question: what does the cash-pool leader actually do to justify its remuneration?

Different transactions, different jurisdictions and different procedural outcomes therefore led back to remarkably similar questions about functions, risks, commercial rationale and evidence.

What this means for Singapore

For businesses undertaking related-party transactions through Singapore, these issues have immediate practical relevance.

IRAS requires taxpayers to apply the arm's length principle and, where applicable, prepare and maintain contemporaneous transfer pricing documentation. Its current guidance expressly covers related-party services, loans and other financial transactions, as well as mechanisms for preventing and resolving disputes (See: IRAS: Transfer Pricing) ↗ (opens in new tab)

At the same time, Singapore's implementation of Pillar Two and its stated implementation of the 2026 Side-by-Side package mean that transfer pricing professionals increasingly need to understand how their work connects with a wider international tax architecture (See: IRAS: Registration for Multinational Enterprise Top-up Tax and Domestic Top-up Tax ↗ (opens in new tab)

That makes transfer pricing an increasingly multidisciplinary capability. Technical knowledge of the arm's length principle remains essential, but so too are an understanding of business operations, financial transactions, governance, documentation and dispute management.

Transfer pricing as an exercise in explainability

Perhaps the clearest way to bring the session's different strands together is to see transfer pricing increasingly as an exercise in explainability.

Can a business explain what transaction actually occurred?

Can it explain why the entities involved earn the returns attributed to them?

Can it identify who makes the economically significant decisions and controls the relevant risks?

Can it demonstrate why its transfer pricing method follows from those facts?

And can it produce contemporaneous evidence to support that explanation when another tax authority views the same arrangement from a different jurisdictional perspective?

The cases and developments considered during the session suggest that these questions cannot be answered only when a dispute begins. They have to be considered when arrangements are designed, implemented and subsequently operated.

The price still matters. But increasingly, a defensible price begins with a defensible account of the economic reality behind it.

Speakers networking prior to the session.

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The Masterclass with Professor David Rosenbloom and Professor Dr René Matteotti continues until 2 September 2026.

Registration remains available through TaxWatch until 5 September 2026. Register while the Masterclass is underway to join eligible remaining sessions live, in person or virtually where applicable, catch up on eligible sessions already completed, and continue accessing available session recordings and notes until 31 December 2026. The current Tax Academy event page confirms live and on-demand access arrangements for the Masterclass, while TaxWatch sets out the wider access arrangements for eligible content.