Transfer pricing perspectives: Winds of Change - PwC

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The building blocksThe building blocks for a defensibleapproach to financial transactions transferpricing are:The blueprintStakeholders across tax, accounting/controlling, treasury and the CFO needto be involved in the process and theirbuy‐in secured.Building the policyThe transfer pricing policy in this areashould be flexible enough to balance thetypes of transactions and requirementsof different countries with the magnitudeand often large volume of transactions.The transfer pricing mechanism should bereviewed regularly to consider the impactof changes in the market, regulations or theunderlying transactions.DocumentationAppropriate transfer pricing andcommercial documentation (e.g. executedagreements specifying terms andconditions) supporting the arrangements,both at a headquarter and local level,should be maintained in case of atransfer pricing audit. Companies needto make a strategic decision on theirdocumentation approach, ranging from acentralised ‘masterfile’ approach to local‘standalone’ documentation which includeslocal agreements. The quantum of thetransactions and associated tax risk shouldhelp inform this decision.Defence under auditControversy management requires keystakeholders to deal with the tax authoritiesand to give consistent messaging, supportedthrough the provision of the ‘right type andamount’ of information. Taxpayers shouldknow the options that are available to themand monitor regulatory developments andtrends. Companies should reconcile the TPpolicy in place with the actual amounts thatget booked in the accounts to ensure thepolicy is implemented appropriately andcan be defended as such under an audit.Advance Pricing AgreementFinancial transactions do not traditionallyfeature in many APAs, however, taxpayersmay want to reconsider this avenue asa way to eliminate or reduce tax riskssurrounding financial transactions. Thedecision to do so should depend on thestrategic importance and quantum ofthe transaction.Stakeholders across tax, accounting/controlling, treasury and the CFO needto be involved in the process and theirbuy‐in secured70 Transfer Pricing Perspectives. October 2011
ConclusionsTransfer pricing for financial transactionsis still evolving at the same time as itincreases in prominence. Companies needto develop a strategy for dealing with theissues, documenting them and dealingwith the transfer pricing audits that willinevitably arise in this area.AuthorsMichel van der BreggenPartner, PwC Netherlands+31 (0) 88 792 75 23michel.van.der.breggen@nl.pwc.comDanielle DonovanPartner, PwC Australia+61 (7) 3257 8102danielle.donovan@au.pwc.comRalf HuessnerAssociate Director, PwC Hong Kong+852 2289 3568ralf.rh.heussner@hk.pwc.comPrashant BohraSenior Manager, PwC Australia+61 (3) 8603 4087prashant.bohra@au.pwc.comAdditional credit toDavid McDonaldDirector, PwC Hong Kong+852 2 289 3707david.mcdonald@hk.pwc.comAdditional credit toDhaivat AnjaraPartner, PwC India+91 22 6689 1333dhaivat.anjaria@in.pwc.comRyann ThomasPartner, PwC Japan+ 81 3 5251 2356ryann.thomas@jp.pwc.comPaul LauPartner, PwC Singapore+65 6236 3733paul.st.lau@sg.pwc.comRichard WantanabePartner, PwC Taiwan+886 2 2729 6666 26704richard.watanabe@tw.pwc.comMohamed SerokhDirector, PwC China+41 58 792 4516mohamed.serokh@ch.pwc.com
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2 Transfer Pricing Perspectives. Oc
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Russia adopts new transfer pricing
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Starting in 2014, domestic related-
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The trend of centralisation in mult
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The new frontier - centre-led model
Page 19 and 20: Limited risk entities and true‐up
Page 21 and 22: Is it possible to mount an argument
Page 23 and 24: Value Chain Transformation -beyond
Page 25 and 26: Governments around the globe are fo
Page 27 and 28: ProcessesTransfer pricing managemen
Page 29 and 30: TPi - Data ManagementMost multinati
Page 31 and 32: ConclusionTPi changes the historic
Page 33 and 34: The question of who takes risky dec
Page 35 and 36: Why cost plus might be the wrongpol
Page 37 and 38: It is not easy to deal with risk in
Page 39 and 40: ConclusionIt will not always be the
Page 41 and 42: Perspectives on risk from GermanyIn
Page 43 and 44: Perspectives on risk from IndiaThe
Page 45 and 46: In 2008, we published an article en
Page 47 and 48: The taxpayer will also want to unde
Page 49 and 50: Proactive preparationTransfer prici
Page 51 and 52: Dealing with risk assessmentsMuch o
Page 53 and 54: Once a taxpayer has identified its
Page 55 and 56: ConclusionAlthough it goes without
Page 57 and 58: The Asia Pacific (APAC) region is i
Page 59 and 60: As can be observed from the diagram
Page 61 and 62: As more transactions involve Singap
Page 63 and 64: AuthorsSpencer ChongPartner, PwC Ch
Page 65 and 66: Conceptualising the challengeIntra
Page 67 and 68: During the course of recent transfe
Page 69: Passive associationIn performing a
Page 73 and 74: Let’s talk business realities!Whi
Page 75 and 76: The appropriateness of using a trad
Page 77 and 78: Following the completion of the rev
Page 79 and 80: Finally, another concern raised rel
Page 81 and 82: Transfer Pricing developments in th
Page 83 and 84: Transfer Pricing Perspectives. Octo
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