End-to-end transfer pricing: Beyond the tax department

An end-to-end strategy means an end to transfer pricing confusion

Governments around the globe are focused on transfer pricing enforcement as a preferred method of augmenting tax collections, leading to more aggressive tax and transfer pricing audits for multinational corporations.

A new, more strategic approach to transfer pricing management

While transfer pricing compliance is principally a matter for senior tax executives, responsibility for the actual execution of inter-company transactions is generally spread out across a broad chain of often detached internal functions and distant offices.

The entire process typically involves multiple hand-offs between tax, regional/global controllership, shared services, information technology, and external advisers. In the absence of unified oversight or co-ordination, fiscally unsound conditions can develop at every transaction point. These can include:

  • Ambiguities of responsibility
  • Manual, informal, “ad hoc” practices
  • Accounting-policy or data mismatches
  • Insufficient mechanisms for reconciliation
  • An overreliance on personal relationships or specific function “heroes”
  • Undocumented interpretations of ambiguous terms in inter-company agreements

It’s easy to see how these conditions can expose multinational organisations to significant risks, including compliance and tax risks (material errors) and gross inefficiencies - not to mention frustrations resulting from breakdowns in the execution chain.

Clearly there is a need to address transfer pricing as a more holistic, end-to-end (E2E) process, one that draws together the wider chain of activities into a well-defined set of procedures - from strategy, all the way through your financial and operational systems, to your local financial statements and tax returns.

End-to-end transfer pricing execution: Worth it on every level

While the process of examining multiple internal functions and addressing your procedures, personnel, and technology can be lengthy and complex, the benefits of a more strategic E2E transfer pricing execution can be widespread and long-lasting. These include:

  • Meeting statutory requirements in a more timely and efficient manner
  • Reducing audit risks and decreasing costs of audit defence
  • Maintaining better internal tax controls
  • Developing a faster close process
  • Standardising data collection processes and transfer pricing calculations
  • Rationalising IT/systems investment
  • Improving cash tax management
  • Performing efficient transfer pricing scenario analysis
  • Reducing indirect tax compliance costs   

Improved compliance, transparency, efficiency and communication

PwC’s transfer pricing professionals can help you reinvent your E2E strategy and processes, leading to a more streamlined approach, reduction in workload, increased accuracy of charges, significantly enhanced transparency, and - not least - well-positioned documentation to support future reviews, including local statutory audits.

Contact us to learn more about how we can help you adopt a strategic, end-to-end approach to your transfer pricing execution.