All companies that operate in several countries must comply with legal requirements concerning transfer pricing. How do you deal with uncertainty created by changing regulations and their interpretation? Changes initiated by the OECD, EU and national governments require you to actively monitor, implement and if necessary amend modify how you determine and justify your internal transfer pricing policy.
Country-by-Country Reporting executed correctly and thinking ahead
Multinational enterprises (MNEs) with a consolidated turnover of more than EUR 750 million are required to annually file a Country-by-Country Report (CbCR) within 12 months after the reporting year. Preparing the CbCR may place significant pressure on an MNE’s IT systems and operations. How will you prepare your organization for the annual CbCR process?
How PwC can help
PwC can support you in completing the CbCR and filing it with the tax authorities in the Netherlands and abroad. Furthermore, we can prepare analyses using your CbCR data to identify omissions or errors, and to anticipate potential questions from tax authorities. We also host workshops to discuss how the CbCR data ties in with your Group’s strategy and tax policy, and how the data could be used for (external) reporting purposes.
Transfer pricing set-up that incorporates the impact of digitalization
Digitalization within Industry 4.0 has changed the way companies develop, produce and market their products, but also how they target and serve their customers. Digitalization has made local presence for companies no longer a requirement for them to extract value from local markets. This resulting centralization has triggered unilateral tax measures and proposed changes of the international corporate income tax system by the OECD to reallocate profits to the local markets. At the same time, global companies are forced by large global trends to become more decentralized players as well, having presence and intangibles in local markets. All of these trends are impacting companies’ value chains, transfer pricing models, and allocation of taxable income.
How PwC can help
PwC can support you in designing a transfer pricing setup aligned with the value creation within your company. For this, we perform a value chain analysis of your business, to identify and document the intangibles as part of the transfer pricing methodology from a value contribution perspective. We can also quantify the potential impact of the OECD’s proposals on your company, and assist with interactions with internal stakeholders (e.g. the C-suite).
The ongoing development of technical capabilities including digitalization puts pressure on internal as well as external stakeholders to optimise the transfer pricing policies and processes. This with the aim to reduce year-end adjustments and the burden on internal resources to perform all calculations and provide support upon tax audits.
With an all-encompassing end-to-end (E2E) transfer pricing process, you will have control over setting the transfer pricing policy but also over the implementation thereof by the multiple departments within your organisation. By building the E2E transfer pricing process on existing processes and available data within your organisation, such process can be set without additional burden on the organisation.
It will result in a robust process that meets the increasing expectations of tax authorities and external auditors.
Streamlining data, digitalization and manual processes
Besides defining the transfer pricing policy and who-does-what in calculation and documentation processes, it is important to build the process on the large amounts of data which are available within your organisation. This requires, among other, a clear oversight, a strategic approach, the right tooling and technology (from Excel, “add-on-engines” to integrated ERP-solutions). In addition, manual and ad-hoc processes must be well structured and automated where possible/desirable.
How PwC can help
Our experts can help you addressing transfer pricing as an E2E process. We draw together the wider chain of activities into a well-defined process, integrated between your financial and operational processes and systems and document it in a Transfer Pricing Control Framework. E2E transfer pricing directly translates transfer pricing design into your local financial statements and tax returns. With E2E advice, PwC offers a holistic oversight of your company’s transfer pricing: from the design phase, up to the last block of the implementation process.
Transfer pricing is definitely in the spotlight, both for financial transactions (FT) within multinationals in all industries, and for transactions specifically within financial services (FS) companies. In these complex areas of transfer pricing, companies have to deal with the current, more stringent regulation and documentation requirements, as well as a tough audit climate.
Evolving regulatory landscape
This complexity is only expected to increase, considering the evolving regulatory landscape driven by OECD and the European Commission, and specific approaches and guidance being released by local tax authorities on this subject. How will you ensure that your company’s policies are in accordance with the latest guidance, requirements, and relevant developments?
How PwC can help
We can support you with your in-house finance policy design, by incorporating treasury procedures and frameworks, benchmark technology, documentation templates, and implementation support. We have extensive expertise on complex areas of transfer pricing, such as real-estate acquisition funding, cash pool policies, and transfer pricing models for FS industry clients.
There is an increasing public discussion on tax transparency and taxation of profits based on where value is created. This has led to the introduction of various legislative and regulatory measures on a global, regional and local level. Furthermore, tax audits are increasingly digitized and focused on data analytics. How will you prepare for discussions with local tax authorities on your company’s tax positions in this changing environment?
Better preparation necessary
Tax authorities worldwide are taking additional steps to assess alignment between the business models of companies and their tax models in place. Examples include the OECD BEPS Actions, increased compliance demands (i.e. Country-by-Country Reporting and Master/Local File), and increased focus on transfer pricing in tax audits. Companies need to develop coordinated approaches to audits and disputes around the globe, and adopt preventative measures (such as pre-filing rulings and enhanced relationships with certain revenue authorities). PwC assists companies in (the preparation of) interactions with tax authorities – from advance certainty, tax audit prevention and preparation, through to communications and dispute resolutions if needed.
Efficient and consistent documentation with PwC’s Global Coordinated Documentation Reporter
In many countries, including the Netherlands, companies must meet increased transfer pricing documentation obligations following the OECD BEPS Action 13 report. How will you manage the annual preparation of the Master and Local File(s) to be compliant in all countries?
How PwC can help
To maximize efficiency and global consistency, PwC developed the Global Coordinated Documentation (GCD) Reporter. It utilizes the latest web-based technologies to create a fast, efficient, and easy-to-use system for producing documentation in a collaborative and cutting-edge environment. GCD Reporter is hosted by PwC and is used in all documentation projects.
Addressing transfer pricing during a transformation project
As the world in which we operate continues to change, business restructuring can offer a way for your companies to gain competitive footing. In such business transformation, every level of the organization is involved, and the implications - operational, tax and legal - are wide in scope and impact.
Create confidence in your global tax position with Value Chain Analysis
External stakeholders – tax authorities, customers, investors and society – increasingly ask for tax transparency. Transfer pricing is seen less and less as a local compliance obligation. How will you gain insight into the balance between the overall value your company generates and the local allocation of profits?