With the end of 2020 quickly approaching, we look ahead to what 2021 may have in store for us. Budgets are being planned and it is important and challenging to consider all relevant factors that (may) influence a company’s financial state.
In recent years, the compliance burden has increased because of the BEPS project with its Master File, Local File and CbC-reporting. Also, additional local TP documentation requirements have been introduced. The MDR is the latest addition to the expanding list of filing deadlines to take into consideration. Non-compliance can lead to large fines, the reversal of the burden of proof and even director’s liability. This has strained the capacity of tax and finance teams dealing with the enormous workload to make sure the compliance burden is met.
Another recent development is that because more information is exchanged between tax authorities, there is a need for globally consistent documentation. Inconsistencies will expose companies to possible controversy cases in various tax jurisdictions.
Furthermore, as most business are focussing on surviving the crisis caused by the COVID-19 pandemic, tax teams need to deal with the fact that tax is not considered a top priority.
Still, the compliance burden is increasingly asking for attention and budget. Finding the time and resources to reflect on your corporate transfer pricing strategy is challenging while dealing with a shortage of money, attention and manpower.
In other words, how can a tax team focus on adding value while at the same time managing global compliance?
Considerations and opportunities
Companies are facing a more transparent environment. Due to the exchange of information between tax jurisdictions and an increase in scrutiny by these jurisdictions, controversy is lurking just around the corner. More questions will be asked and audits will become more common, especially as governments face the financial consequences of the COVID-19 pandemic. Scrutinizing transfer pricing of large corporates may be expected. In the context of an audit, and considering the burden of proof, having good transfer pricing documentation is a necessity.
A tooling solution can be a great option. It can help automating processes and help you set up or maintain your transfer pricing documentation while saving you time and money. It also provides an instrument to safeguard consistency in your global documentation.
However, keep in mind that the storyline is important and will be even more so in the future. Sometimes we see software solutions that restrict users in telling their story the way it is intended. In such a situation the added value of a software solution becomes questionable.
The Coperitas transfer pricing software solution provides a flexible and efficient platform to control your transfer pricing documentation while preserving your storyline.
Depending on its risk-appetite and available resources, a company can prioritise its specific compliance efforts. This may result in the option not to document everything upfront but focus on the most relevant documents. Less relevant documents can be produced on short notice using Coperitas when relevant data is available.
We expect that 2021 will show an increase in compliance regulations as well as an increase in scrutiny by tax authorities. It is important to be aware of this and consider timely actions to stay in control.
Companies need to be critical of what to do and how to do it within the right budget and available resources. Sometimes you will have to be selective. Anticipate what may be needed in the future to be flexible and make sure you have options to deal with this. It is important to have a good control framework, to avoid surprises (or at least to minimize them) and to be able to act in time.
At Quantera Global we use both our expertise and experience to guide you through these times and those yet to come. To further talk about what we expect for 2021, we have a free-of-charge webinar scheduled on Thursday 3 December, from 9:00 – 10:00 CET. Our experts Richard Slimmen and Theo Elshof will dive deeper into the current Transfer Pricing developments and what to expect for 2021. You can register by sending a short e-mail to QGAcademy@quanteraglobal.com and we will send you the dial-in link accordingly. For more information on our Webinars, you can click here.
For more information about the Coperitas software solution please visit www.Coperitas.com