Global Transfer Pricing
System Design
Your bridge to worldwide transfer pricing services
TPAGlobal
Introduction
With more than 50% of global trade in goods and services taking place within multinational groups, transfer pricing is
an important part of doing business within any multinational - one that requires careful planning and consideration.
Notwithstanding transfer pricing risk arising from lack of robust transfer pricing system design and documentation, a
lack of proactive analysis and management in this area may translate to missed opportunities and a sub-optimal overall
effective tax rate for the group.
The purpose for conducting a Global Transfer Pricing System Design is to assist multinational enterprises (MNEs) to
proactively identify and design a transfer pricing system and policy that is consistent with the business model and
sufficiently robust to support the arm’s length nature of the transactions taking place within the group.
This exercise is particularly useful for:
• MNEs that do not have any dedicated transfer pricing resources in-house.
• MNEs that have recently undergone restructuring activities or are planning to establish new subsidiaries/branch in a new
location.
• MNEs that have recently expanded or are seeking to expand their operations offshore.
• MNEs seeking to establish a consistent transfer pricing policy for all international related party dealings.
• MNEs seeking to introduce a new charge to support a change in business model.
• MNEs seeking an independent review on whether the existing transfer pricing policy supports an optimal overall
effective tax rate and is effectively aligned with group tax planning objectives.
Transfer Pricing Associates approaches transfer pricing from a multi-disciplinary perspective covering management control,
economics, legal, tax, finance and cost accounting. As such, in developing our approach to design a robust and practical transfer
pricing policy, we seek to align your transfer pricing practices within your organisation with your legal, tax, accounting and/or
business objectives.
Scope of review
In general, the scope of our work would include:
• A high level summary of the entities, the business model and the transactions taking place in the MNE group. This is usually
based on some preliminary questions raised by Transfer Pricing Associates and addressed by key personnel in your
organisation.1
• Initial assessment of the responsibility centre profile of each of the key types of entities in the MNE group.
• Selection of the most appropriate transfer pricing methodology for each major type of entity in the MNE group for setting and/
or reviewing the pricing of the key related party transactions.
1
This step cannot be seen as a replacement of a full functional analysis. Transfer Pricing Associates will not participate in any interview sessions with your key personnel
to derive such information. All information gathered and provided by your organisation and provided to Transfer Pricing Associates will not be independently verified
by Transfer Pricing Associates.
Your bridge to worldwide transfer pricing services
TPAGlobal
• Identification of the number and types of economic benchmarking studies required in order to comply with the requirements
of the OECD and local tax authorities to determine the arm’s length gross or net margin to be used for price setting
purposes.2 Indicative gross or net margins will be provided for the purposes of initial financial modelling only.
• Recommendations of future steps to be taken to achieve full compliance with OECD and local transfer pricing regulations.
Transfer Pricing Associates’ approach & deliverable
The deliverable of the analysis is a brief report (5-10 pages) detailing the key findings from the review with responsibility centre
profile analysis and recommendations of the most appropriate methodologies to apply in order to arrive at an arm’s length price
setting policy.
Given the high level nature of the review, the documentation included within the scope of our review is intentionally limited to the
following:
•
•
•
•
•
•
Group corporate structure chart.
Copies of the annual report of the MNE group for the last three years .
An organisational chart (if available).
The MNE group’s existing transfer pricing policy document (if available) .
Copies of intra-group agreements or documents already in place to support the MNE group’s transfer pricing practices.
Response to a list of questions raised by Transfer Pricing Associates to determine high level functional profile of each of the types
of entity under review.
Based upon the outcome of the above review process, the design of the transfer pricing strategy and the selection of the most
appropriate pricing setting methods can be undertaken.
As mentioned above, in accordance with the relevant transfer pricing guidelines, the selection of the most appropriate transfer
pricing methods depends on the functional and risk pattern within a multinational group as well as ownership of tangible and
intangible assets. Transfer Pricing Associates uses the classifications resulting from best practices in management accounting (i.e.,
responsibility centres, such as profit-, revenue-, investment- and cost centres) to determine the most appropriate method to price
each transaction and to compensate each group company.
2
Scope and fees of work is for advice on the number and types of benchmarking studies required – the actual studies will lead to additional fees.
Your bridge to worldwide transfer pricing services
TPAGlobal
The report can be used as a starting position for the preparation of the MNE group’s transfer pricing policy paper and to assist
with preparation of detailed transfer pricing documentation to meet local transfer pricing rules and OECD transfer
pricing guidelines. However, the final deliverable can in no way replace the preparation of any formal transfer
pricing documentation for penalty protection purposes. The final report does not include any analysis relating to
corporate income tax, customs or any indirect taxes which may arise from the international transactions under review and
will not address any implementation issues relating to accounting or IT which may be relevant to the multinational group.
For more information, please contact:
Steef Huibregtse
Global Partner
s.huibregtse@tpa-global.com
Peter Andersen
Global Partner p.andersen@tpa-global.com
Douglas Fone Global Partner d.fone@tpa-global.com
Hendrik Blankenstein
Global Partner
h.blankenstein@tpa-global.com
About Us
Transfer Pricing Associates is the leading independent provider of global transfer pricing and valuation services and part
of the Transfer Pricing Associates Global group. The Transfer Pricing Associates Global group is an independent and specialist
provider of expert transfer pricing, tax valuation and customs services, headquartered in Amsterdam and with our own
offices and coverage in over 30 countries around the world. Transfer Pricing Associates provides high quality transfer
pricing advice and assistance to multinationals of all sizes, wherever they are located.
For more details of our innovative services, please visit our website at www.tpa-global.com
Your bridge to worldwide transfer pricing services
TPAGlobal