Transfer pricing analysis
Is your company active in multiple countries? Then you must deal with legal requirements for transfer pricing, such as the OECD transfer pricing guidelines and local transfer pricing documentation requirements. A very important principle in international tax law is the arm’s length principle. Transactions between related entities should be at arm’s length (in market terms). The analysis is required to determine the arm’s length price and companies must document the transfer pricing analysis.
Your challenges, your company:
- needs support in identifying the intercompany transactions
- needs support in setting up the transfer pricing model
- needs support in the application of transfer pricing methods
- needs to verify if transactions are at arm’s length
- needs to seize opportunities within the transfer pricing strategy
- Take advantage of the potential transfer pricing benefits
- would like to avoid transfer pricing risks
Within your transfer pricing policy, you will need documentation about how to handle specific transactions, as well as how to deal with transfer pricing methods in general. If your company does not have a proper transfer pricing policy, or does not have a policy at all, your company will miss out on the transfer pricing benefits. Furthermore, in the event of a transfer pricing audit, the documentation of the transfer pricing model is your first line of defense.
Important aspects you want to analyse and where Quantera Global can support you:
- Analysis of current intercompany transactions / TP model: risks and opportunities;
- Design of the Transfer pricing model: TP methods, responsibilities, implementation;
- Transfer pricing risk analysis and follow-up.
The transfer pricing methods
We distinguish five transfer pricing methods based on the OECD transfer pricing guidelines:
- The comparable uncontrolled price method (CUP);
- The resale price method (RPM);
- The profit split method (PSM);
- The cost-plus method (CPLM);
- The transactional net margin method (TNMM).
The transfer pricing risk analysis
This analysis will provide us with information on the transfer pricing risks and opportunities and how profit allocation to the various entities within the group takes place. The transfer pricing model must be in line with the company’s business model. We take an economic approach, the business model is central. The analysis will show us to what extent the transfer pricing policy is in line with the business model.
Benefits from the transfer pricing analysis
After conducting analysis, the analysis will show which transfer pricing model should be implemented for your company. The analysis will show whether there are opportunities and possible threats within the current transfer pricing policy. These are the most important transfer pricing benefits. Possible risks that may emerge from the analysis are potential audits and discussions with tax authorities. After the analysis, based on the facts and circumstances, we can indicate which opportunities and risks are realistic.
Together with your company, Quantera Global will look at what fits best, and what is desirable for you. We help you to minimize transfer pricing risks and optimize and seize opportunities.