Subsidiaries of international firms operating in Rwanda have been urged to create and keep clean transfer pricing documents that show charges incurred while providing services to promote good corporate governance.

Titus Mukora, a tax expert at PricewaterhouseCoopers, noted that the charges directly affect a subsidiary firm’s income and could, thus lead to tax avoidance if they are not well documented. 

Transfer prices are charges for goods and services between related entities within an enterprise, including branches and companies that are wholly owned by the parent corporation. 

The Organisation for Economic Co-operation and Development (OECD) recently released guidelines on how to determine transfer prices.

Mukora said according to the OECD guidelines, one can only accept a charge if they prove that the service has a demonstrable benefit for the subsidiary company. He noted that the idea is not about government collecting more taxes, but to identify whether the fees are legitimate as per the expenses footed by the company.

"If the charges are illegal, then the government can intervene,” he said.

According to sources, the Rwanda Revenue Authority is also reviewing its transfer pricing rules.