Inter-company transactions across borders are growing rapidly and becoming much more complex.
A transfer price is a price applied in a transaction between related parties (two companies or a company and an individual).
A transfer price must be arm’s length, meaning it must match the market price that two independent entities would apply in a similar transaction under the same or similar (comparable) conditions.
Tax authorities are keeping a closer eye on the growing number of cross-border, inter-company transactions, imposing stricter penalties and new documentation requirements.
Complying with these requirements can be complicated and time-consuming. So every multinational company needs to have a coherent and defensible transfer pricing policy grounded in the very real climate of change in which they are operating.
By considering transfer pricing carefully, you will be able to:
We can help you embed your transfer pricing policy within your wider business strategy by:
Transfer pricing risk evaluation is an assessment of related-party transactions aimed at identifying tax risks. This involves evaluating the transaction, the transfer pricing methods applied, and relevant documents such as contracts, invoices and accounting policy.
Transfer pricing documentation is a file supporting your related-party transactions to help you defend your arm’s length prices in the event of a dispute with the tax authorities.
Benchmarking studies aim to measure the arm’s length level of prices or profits in transactions between unrelated companies. Data searches will use your company’s internal data and international commercial databases such as AMADEUS.
Advance pricing agreements can be signed with the tax authorities to determine the arm’s length price of a particular transaction or type of transaction that exceeds or will exceed €1.43m a year.
Unlike documenting the prices of existing transactions, the purpose of devising a transfer pricing policy is to make plans for future transactions or restructure existing transactions. For example, transfer pricing policy planning can include:
Changes to the business environment force groups to restructure from time to time. Restructuring can have various goals such as saving cost or improving performance. However, transfer pricing should be considered in any group restructuring. Examples of restructuring goals include:
Depending on your particular aims, PwC will offer to design a tax-effective group structure, make transfer pricing plans for your intragroup transactions, and provide tax and legal advice to help you implement the new structure.
In tax practice the form of a transaction frequently matters more than the substance, and so it is crucial to prepare basic transfer pricing documents such as contracts and invoices correctly.
PwC’s offerings include:
PwC has experience of representing clients in dealings with the tax authorities. For example, PwC can draft a transfer pricing document supporting certain transactions, prepare answers to any questions the tax authorities might ask during a tax audit, take part in your final tax-audit discussions with the tax authorities, and appeal to the Director General of the State Revenue Service and to the courts against any unfavourable decisions.