Pro-TP Implementation of appropriate transfer pricing strategy

What should be done?

1 – Fixing transfer pricing mistakes for past years (as far as still possible) by

• Implementing intercompany pricing where required
• Revisiting the form and content of intercompany agreements
• Identifying gaps in existing documentation and taking appropriate steps to fill same.

2 – Implement an appropriate transfer pricing system by

• Determining the most suitable transfer pricing methods for intra-group transactions
• Providing suitable intra-group agreements for intra-group transactions
• Providing the required (minimum) additional transfer pricing documentation according to the rules of the countries in which the group operates. Requirements differ by country as follows:
  •   short memos describing the business structure and transfer pricing methods applied (plus necessary intra-group agreements), where nothing else is needed
  •   ‘local files’ for companies of the group in cases where documentation for some companies of the group is mandatory (plus necessary intra-group agreements),
  •   ‘master files’ giving information on the structure of the group, its business and intra-group transactions as well as ‘local files’ for companies of the group in cases where such
    documentation is mandatory (plus necessary intra-group-agreements),
  •   ‘country-by-country-reporting’ where necessary.
• arranging for benchmarking studies’ (by experienced and competitive suppliers) demonstrating the adequateness of the group’s transfer prices by third-party-comparisons

3 – Keeping the transfer pricing system up-to-date in the future by

• Adjusting pricing, agreements, and documentation in light of changes in the business and structure of the group
• Adjusting pricing, agreements, and documentation as a consequence of changes in legal requirements

How will it be done?

• As much as necessary to comply with the rules (to avoid unpleasant discussions with auditors, taxmen, higher taxes and fines)
• As little as necessary (to avoid unnecessary internal rules, procedures, documents, and data as far as possible)