One of the most significant features of the new transfer pricing regulations, which will become mandatory this year, is the tightening of segmentation requirements. Revenue, costs, and profitability attributable to individual related-party transactions must be presented at an appropriate level of detail and in a manner that supports transfer pricing analyses and benchmarking studies.
This poses a particular challenge for the pharma sector because a single legal entity often performs multiple functions simultaneously: marketing, sales, clinical research or R&D, manufacturing, packaging, and distribution of licensed products. These activities have different risk profiles and therefore cannot automatically be treated as a single pool of profitability for transfer pricing purposes. The new regulatory framework clearly shifts the focus toward a transaction- or activity-level approach.
Furthermore, pharmaceutical groups frequently operate across multiple jurisdictions. The products and services offered, functions performed, business strategies pursued, economic circumstances, and degree of competition may vary significantly from country to country. The impact of these differences must be carefully considered both when establishing transfer prices and when assessing comparability. Where necessary, appropriate comparability adjustments should also be made.
Many companies still focus primarily on their day-to-day operations throughout the year and only turn their attention to transfer pricing compliance during the year-end closing process. This approach is becoming increasingly risky.
The core components of transfer pricing are closely interconnected: setting transfer prices, designing an appropriate segmentation framework, conducting benchmarking studies, and preparing transfer pricing documentation. When companies attempt to address all these tasks for all related-party transactions only at year-end, they often discover too late that the necessary data is unavailable in the required level of detail. Cost allocations may have to rely on retrospective estimates, and controlling systems may be unable to reliably separate the results of individual transactions in a reproducible manner. This is a recurring issue that tax authorities frequently identify during audits.
The safest and most efficient approach is to integrate transfer pricing processes into day-to-day business operations. Ideally, transaction pricing should be determined when transactions are initiated and supported by benchmarking analyses from the outset. Segmentation logic should be embedded into accounting and controlling processes, and cost allocation keys should be documented and reproducible. Such an approach would not only reduce compliance risk, but also significantly improve the reliability of benchmarks, documentation and the consistency of transfer pricing data submitted to the tax authority.
Implementing such a framework is far from simple; outsourcing transfer pricing matters to experienced specialists is often the most effective solution. The Transfer Pricing Business Unit of LeitnerLeitner can be an ideal partner, with our experience in tax audit defense and international tax advisory services. With our comprehensive approach, we consider the entire transfer pricing practice beyond the given transaction and draw our clients’ attention to the accounting and other tax-related connections.
This article was first published in the Budapest Business Journal print issue of September 4, 2026.
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