1. Introduction

As multinational enterprises (“MNEs”) approach the close of the financial year, it becomes increasingly important to ensure that transfer pricing (“TP”) arrangements remain aligned with actual business operations, financial outcomes, and compliance requirements. Year-end adjustments (“YEAs”) are an essential tool to correct deviations and ensure that results reflect the arm’s-length principle. These adjustments generally occur shortly before closing the books, allowing groups to align their commercial accounts with their documented TP policies.

If transfer prices have not been applied correctly throughout the year, tax authorities may challenge the reported results, leading to adjustments, double taxation, tax interest, and penalties. A structured year-end review process helps organisations identify potential issues early and implement corrective measures in time.

This article outlines the YEA process and the practical steps that companies should follow, such as reviewing current outcomes, calculating adjustments, and ensuring proper implementation. It is not intended as case-specific advice. For tailored guidance, our TP specialists at Svalner Atlas are available to support you.

2. Review existing TP arrangements

The financial year-end offers an opportunity for groups to assess whether their TP arrangements still reflect the economic reality of their operations. Many companies experience changes during the year that were not anticipated when the TP policy was drafted. Examples include shifts in supply chains, changes in functional profiles, new business lines, or unexpected cost developments.

It is important to review whether the transfer prices recorded in the financial statements accurately reflect the underlying business activities in each jurisdiction. Unexpected losses or unusually high profitability can indicate that the TP policy has not been applied as intended. In such cases, a YEA may be necessary.

3. Analyse transactions and determine adjustments

A core part of the YEA process is identifying intercompany transactions that have produced results outside the expected arm’s-length range. This requires reviewing sales of goods, service fees, financial transactions and the results achieved by limited-risk distributors, contract manufacturers, or contract service providers.

Situations that often require attention include:

• Entities that apply budget-based transfer prices and need a true-up or true-down before year-end
• Contract service providers with a cost-plus policy whose actual cost base has changed significantly
• Limited-risk distributors whose margins fall outside the benchmarked interquartile range
• Financial transactions that may require updated interest rate reviews
• Acquisitions or internal reorganisations that may require updated TP characterisations

By performing these checks before year-end, groups can ensure that their entities finish the year within the intended arm’s-length ranges.

4. Address tax compliance and customs considerations

YEAs can have implications that extend beyond corporate income tax. Adjustments that affect intercompany prices may also impact customs valuations and indirect tax positions. If customs values and TP documentation are inconsistent, this may trigger questions from customs authorities or lead to additional duties.

A coordinated approach between TP, tax reporting and customs teams helps ensure that adjustments are applied consistently and properly supported.

5. New developments in TP

Pillar One – Amount B

Amount B aims to simplify the pricing of baseline marketing and distribution activities by providing a fixed return for qualifying distributors. Documentation requirements remain largely the same, but groups must verify whether any of their distribution entities fall within the scope in countries that choose to apply Amount B.

This requires modelling to evaluate expected returns, assessing whether distributors meet the qualifying conditions and ensuring that the financial data used in the analysis is accurate. Dual analyses may be required in jurisdictions that do not adopt Amount B.

Amount B in the Netherlands

On 4 December 2024, the Dutch Deputy Minister of Finance issued a new Decree confirming that the Netherlands will not apply Amount B to domestic distribution activities. However, the Netherlands will accept outcomes of Amount B applied by other countries, provided that:

• The other jurisdiction has legally implemented Amount B
• The entity has applied Amount B correctly
• A bilateral tax treaty exists between the Netherlands and that jurisdiction

In such cases, the Netherlands will grant a corresponding adjustment to prevent double taxation.

Pillar Two and the global minimum tax

Pillar Two introduces a minimum effective tax rate of 15 percent for groups with consolidated revenues above 750 million euro. These rules significantly increase reporting obligations and require extensive data collection across multiple jurisdictions.

YEAs may affect Pillar Two calculations and disclosures. For this reason, groups should assess data gaps early and ensure that systems can produce the required information. Many organisations may need automation tools to manage the complexity of these new requirements.

Compliance with local TP rules

Local TP legislation varies across jurisdictions. Some countries allow YEAs only under specific conditions, while others restrict downward adjustments unless the counterparty reflects a corresponding upward adjustment. In the Netherlands, downward corrections are only accepted when the company can demonstrate that the corresponding upward adjustment has been included as taxable income abroad. Without sufficient evidence, the Dutch tax authorities will deny the downward correction, which may result in double taxation. Groups should ensure that any YEA is recognised symmetrically and complies with the rules in all relevant jurisdictions.

Strategic use of operational TP solutions

Companies that regularly rely on substantial YEAs may benefit from operational TP solutions. These tools integrate TP policies into day-to-day processes by automating data collection, applying pricing rules throughout the year and monitoring outcomes in real time. This reduces the risk of unexpected deviations and minimises the need for large YEAs.

Planning for the year ahead

In addition to finalising current YEAs, organisations should also begin planning for the upcoming year. This includes reviewing budgets, updating TP policies, incorporating recent OECD developments such as Pillar One and Pillar Two and assessing whether operational improvements can reduce future adjustment needs.

Proactive planning helps ensure long-term compliance and supports business objectives.

6. Conclusion

The end of the financial year is an important moment to review and adjust TP arrangements. By assessing current results, analysing intercompany transactions and implementing required corrections in a timely manner, MNEs can ensure alignment with the arm’s-length principle and avoid compliance issues.

With proper planning, accurate documentation and the use of operational TP tools, organisations can enter the new financial year with a clear TP strategy and reliable financial outcomes.

7. Key takeaway

A consistent application of the group’s TP policy is essential. Deviations may lead to tax authority challenges, double taxation, tax interest and penalties. A well-structured review process, combined with timely implementation of YEAs, helps ensure that results remain aligned with the intended TP policy. This is particularly important in jurisdictions such as the Netherlands, where downward corrections are limited and require proof of a corresponding adjustment abroad. Should you have any questions regarding the above (or TP in general), our TP specialists are of course happy to assist you with their expertise.