Transfer Pricing

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The OECD’s BEPS measures have prompted tax authorities to introduce additional transfer pricing obligations for tax payers. As a global service provider in transfer pricing services, DFS has transfer pricing specialists who are fully abreast of the changes and can assist you in meeting your local, regional and global obligations,  and in particular, deliver the following services:

Governments and tax authorities have long been suspicious that international companies have been able to exploit the differences that exist between the domestic tax laws of each country that haven’t kept pace with the global business world of today. Notably, the assistance and support of the OECD, the IMF, and other international organisations has been requested to produce guidance and measures to counter this perceived tax avoidance.

In July 2016 the OECD published draft conforming changes to Chapter IX (nine) of its Transfer Pricing Guidelines (action points 8 to 10 of the BEPS Plan) and two further discussion drafts as a result of the BEPS initiative. Further changes to the guidelines are expected in 2016/17 with respect to the valuation of intangibles, inter-group services and financial transactions.

At DFS we believe businesses should take a proactive approach to transfer pricing based on the following 5 principles:

Put yourself in the Tax Authority’s shoes
How do you think tax authorities from both sides will react to local country results? Do they look too profitable? Not profitable enough? What would the authorities want to understand about your inter-company pricing strategy?
Use plain language
Avoid the creation of suspicion that may result from confusing explanations of facts, analyses, or your transfer pricing strategy.
Perform interim reviews
Mid-year changes to inter-company prices are much easier than reacting to surprises after year-end. A review after six months, and another review after the third quarter can reduce the risk of unwanted surprises.
Inconsistency can be hugely damaging to a defence. Documentation prepared for one jurisdiction should never contradict an analysis or information provided to another tax authority. Double tax agreements (tax treaties) generally provide for the exchange of information.
Keep it simple
A straightforward approach to transfer pricing is simpler to administer, reduces audit risk, and is easier to defend, when necessary. An appropriate transfer pricing strategy can optimize cash management and help to avoid the disruption of day-to-day operations.