Transfer Pricing

Are you a glo­bally ope­ra­ting com­pany? Do your do­mestic and in­ter­na­tio­nal group com­pa­nies and bran­ches con­ti­nuously ex­change sub­stan­tial quan­ti­ties of goods and ser­vices? If so, you should pay par­ti­cu­larly close at­ten­tion to how you de­sign and do­cu­ment trans­fer pri­ces for these cross-bor­der in­tra­group supply re­la­ti­ons­hips. Tax ad­mi­nis­tra­ti­ons at home and ab­road re­gu­larly put the spot­light on these is­sues and ge­ne­rally view them in a very cri­ti­cal light.

Clean transfer prices?

Most go­vern­ments have ad­op­ted spe­cial re­gimes to pre­vent in­ter­na­tio­nal groups of com­pa­nies from ex­ploiting po­ten­tial loo­pho­les that could re­duce the tax re­ve­nue of the coun­tries con­cer­ned. These ru­les sti­pu­late the con­di­ti­ons un­der which trans­fer pri­ces are ac­cep­ta­ble for tax pur­po­ses. The arm’s length prin­ci­ple has emer­ged as the in­ter­na­tio­nal con­sen­sus bench­mark for these ru­les. This in­ter­na­tio­nal ap­proach is de­si­gned to en­sure that the sub­stance of the in­di­vi­dual na­tio­nal re­gimes does not dif­fer to such an ex­tent that the out­come is eit­her dou­ble ta­xa­tion or non­ta­xa­tion. Com­ply­ing with this arm’s length prin­ci­ple and do­cu­men­ting com­pli­ance pose con­side­ra­ble chal­len­ges in prac­tice for com­pa­nies.

Clear about transfers of functions?

Es­pe­cially middle-mar­ket com­pa­nies of­ten ex­pe­ri­ence very dy­na­mic growth - in par­ti­cu­lar when it co­mes to the struc­ture of their in­ter­na­tio­nal busi­ness. In many ca­ses, they only seek tax ex­per­tise if there are chan­ges to the struc­ture of the group un­der com­pany law. By con­trast, the tax di­men­sion is fre­quently un­de­re­sti­ma­ted in the case of pu­rely or­ga­niza­tio­nal chan­ges in the group wi­thout any le­gal con­se­quen­ces. The cri­te­ria for a “tax trans­fer of func­tions” may also be met in ca­ses like this. This nor­mally re­sults in con­side­ra­ble tax lia­bi­li­ties and can end­an­ger the pro­fi­ta­bi­lity of a re­struc­tu­ring or or­ga­niza­tio­nal pro­ject.

Documentation requirements satisfied?

Your com­pany must do­cu­ment all in­tra­group supply re­la­ti­ons­hips in de­tail so that the tax ad­mi­nis­tra­ti­ons can ex­amine trans­fer pri­ces and trans­fers of func­tions. It is not enough me­rely to de­scribe the exis­ting supply re­la­ti­ons­hips and the trans­fer pri­ces ap­plied, as well as the me­tho­do­logy used to cal­cu­late them. Ra­ther, you must de­mons­trate they are ve­ri­fia­bly ap­pro­priate, mea­ning that they pass the arm’s length test. And there’s more: Com­pa­nies that don’t com­ply with the do­cu­men­ta­tion re­qui­re­ments and the re­la­ted filing dead­lines will ge­ne­rally face pain­ful pe­nal­ties, both in Ger­many and ab­road.

Can we help you?

The to­pic of trans­fer pri­cing is very wide-ran­ging and ex­tre­mely com­plex. In light of the con­side­ra­ble im­pact it can also have on non­tax areas, it de­mands a well thought out, ho­listic ap­proach that con­siders all the re­le­vant as­pects and re­flects them ap­pro­pria­tely. It is also vi­tal to en­sure that the sys­tem can be cre­di­bly ex­plai­ned to tax ad­mi­nis­tra­ti­ons at home and ab­road and can be de­fen­ded in any tax au­dits. We would be plea­sed to sup­port you in these ac­tivi­ties so that you can be­ne­fit from our ex­pe­ri­ence in all kinds of sce­na­rios and pro­jects. We fo­cus sys­te­ma­ti­cally on the spe­ci­fic re­qui­re­ments and fea­tures that cha­rac­te­rize and shape your or­ga­niza­tion.

Our services at a glance

• Sup­port for pri­cing cross-bor­der supply re­la­ti­ons­hips that re­flects all tax as­pects (e.g., VAT, cu­st­oms du­ties, ac­coun­ting)
• Health check for the exis­ting trans­fer pri­cing do­cu­men­ta­tion and trans­fer pri­cing sys­tem
• De­sign of in­ter­na­tio­nally coor­di­na­ted, sup­por­ta­ble trans­fer pri­cing mo­dels that are tailo­red to your com­pany, in­clu­ding im­ple­men­ta­tion sup­port (e.g., draf­ting con­tracts, hol­ding work­shops, draf­ting in­struc­tions and po­li­cies, im­ple­men­ting pro­ces­ses and pro­cess de­scrip­ti­ons, de­ve­lo­ping tem­pla­tes)
• Sup­port for pre­pa­ring trans­fer pri­cing do­cu­men­ta­tion - both in in­di­vi­dual areas (e.g., pre­pa­ring the func­tio­nal and risk ana­ly­sis, or the arm’s length ana­ly­sis) or in all areas (e.g., sup­port for the mas­ter file con­cept or for pre­pa­ring do­cu­men­ta­tion nee­ded only for Ger­man pur­po­ses)
• De­fi­ni­tion of the KPIs for the in­di­vi­dual tran­sac­tion ty­pes, in­clu­ding bench­mar­king if ap­plica­ble, nee­ded for the arm’s length do­cu­men­ta­tion
• De­fen­ding your trans­fer pri­cing mo­del in tax au­dits
• Sup­port for ap­peals in li­ti­ga­tion or out-of-court pro­cee­dings re­la­ting to tech­ni­cal trans­fer pri­cing is­sues
• Ar­ran­ging mu­tual agree­ment pro­ce­du­res to eli­mi­nate eco­no­mic dou­ble ta­xa­tion that could re­sult from trans­fer pri­cing ad­just­ments by do­mestic or for­eign tax ad­mi­nis­tra­ti­ons
• Im­ple­men­ting ad­vance pri­cing ar­ran­ge­ments (APAs)
• Ex­pert opi­ni­ons on com­plex is­sues
• Coor­di­na­tion/agree­ment with your ad­vi­sers/col­lea­gues ab­road or with our col­lea­gues in Ne­xia In­ter­na­tio­nal.