THE IMPORTANCE OF A TRANSFER PRICING PROFESSIONAL

 

A transfer pricing professional provides significant value for clients in three distinct ways: 1) ensure compliance with transfer pricing guidelines, 2) provide guidance in planning and optimizing transfer pricing policies, and 3) assist with dispute resolution.

ENSURING COMPLIANCE WITH TRANSFER PRICING GUIDELINES

When it comes to satisfying tax authorities, companies face a big compliance challenge. It can be very taxing to produce transfer pricing documentation that is both contemporaneous and compliant with filing requirements. Penalties are assessed if a taxpayer’s transfer pricing documentation does not adhere to local tax regulations and the OECD guidelines.  Oftentimes, taxpayers have to decide whether to take any reserves for uncertain tax positions on their financial statements or not; and without an extensive experience in transfer pricing and its nuances, taking a decision can be hard. To avoid unnecessary risks associated with compliance, a transfer pricing professional becomes very invaluable.  Because Transfer Pricing Professionals understand the nuances of the industry and transfer pricing risks like no one else, they can provide penalty protection and decrease the risk of an audit or dispute by tax authorities.

PLANNING & OPTIMIZING TRANSFER PRICING POLICIES

Companies often engage transfer pricing professionals when there are changes in their business changes, such as:

  • The supply chain is altered
  • A new product is developed
  • New intellectual property is created/acquired
  • The business is restructured
  • An acquisition or divestiture occurs

Amidst these changes, a transfer pricing professional makes sure that taxpayers make smart transfer pricing decisions to ensure a positive outcome. Careful and appropriate transfer pricing planning in these scenarios can result in optimal financial performance; in contrast, a lack of planning can lead to a poor outcome for the business.  Transfer pricing professionals have significant experience with different industries and transactions and a broad set of knowledge and skills that can help clients find creative ways to achieve their ideal outcomes.

For example, if Company X, a large organization acquires Company Y, a smaller company from a completely different industry, the parent company X’s employees may lack industry expertise in the newly acquired company Y. A transfer pricing professional can offer an objective, knowledgeable perspective and can help manage the planning process to maximize profits and minimize risk throughout the acquisition.

RESOLVING DISPUTES

A transfer pricing professional is also especially valuable in situations where tax authorities audit or evaluate a company’s tax policies and documentation. This process is very critical, and it is imperative to have the right representation when a company’s transfer pricing is being challenged.  From a strategic perspective, it is important and beneficial to engage a Transfer Pricing Professional from the start because a transfer pricing professional knows how to best respond to requests for information, and how to present a business in the right way to achieve an ideal outcome. You are less likely to achieve a favorable resolution if tax authorities have not accepted your position early on in the process. Involving experts from the beginning, before the tax authority begins gathering information, is critical for establishing trust and influence.  Once a tax authority has established a counter position, it becomes a true controversy. At this juncture, you absolutely need representation. From the appeals process to litigation, there are many complicated and potentially costly steps in the process that are difficult for companies to manage without help.

  • Help in your compliance issues?
  • Developing a new product?
  • Creating or acquiring a new intellectual property?
  • Planning an acquisition to grow your business?
  • Facing transfer pricing audit?

Talk to us at jeascorp.com as part of your Transfer Pricing planning strategy.

Ayeni Emmanuel

Tax Advisory Consultant, Tax Researcher, Transfer Pricing, Qualifications: JD (law), LLM, International Taxation and Financial Services; Tax Compliance and Risk Management, PhD Transfer Pricing.

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