How do we design Transfer Pricing
Design and develop a holistic transfer pricing policy by operating as a transfer pricing business partner. We act as their on-call transfer pricing service provider and provide practical yet defendable solutions to their transfer pricing problems.
The specific services that we offer include:
After this design phase, we prepare your transfer pricing documentation, which may consist of either:
Inter-company agreements are key in demonstrating the actual conduct of parties. They also provide tax authorities a view as to whether independent parties would be willing to accept such contractual terms. In line with BEPS Action Plan 8 – 10, in performing any transfer pricing analysis, the OECD recommends that the actual transaction between the parties should be deduced from written contracts and the conduct of the parties. Thus, a review of the contractual terms is considered as the initial starting point for any transfer pricing analysis, which highlights the importance of intercompany agreements.
Transfer pricing is by its nature an inexact science and taxpayers therefore need to understand and demonstrate that their pricing is arm’s length by reference to independent and comparable transactions. This can only be achieved through performing benchmarking studies. From the tax authority perspective, they are seeking to understand how a company performs against comparable companies or with regard to comparable transactions and benchmarking is therefore a compulsory part of any compliance or defense documentation. Benchmarking studies can also be used in planning analyses to determine how to price intercompany transactions.
Benchmarking studies are the basis for any transfer pricing analysis as they provide the necessary support on third party prices, which taxpayers are able to rely on to demonstrate the arm’s length nature of their transactions.
Companies often would like to restructure their operations due to changes in the commercial / business objective. It is critical to ensure that these transactions are structured in a tax efficient manner and are consistent with the local transfer pricing regulations.
In addition, companies may be embarking on new transactions, which may necessitate transfer pricing analysis to help provide guidance on either the transfer prices that need to be established or the profit margins that need to be established in arriving at the transfer prices.
Such analysis can also be used to support the arm’s length nature of related party transactions where the value of these transactions do not necessarily attract the need to prepare transfer pricing documentation. In many situations, taxpayers whose value of related party transactions exceed a particular threshold are required to prepare transfer pricing documentation. However, tax authorities can still request for transfer pricing analysis for other transactions, where detailed documentation may not be prepared. The analysis that is prepared under an engagement of this nature can be used to support these transactions.