Members' Area

Tax Issues - Transfer Pricing

General
Transfer Pricing Reviews
Documentation
Global tax planning
Dispute Resolution
Advanced Pricing Agreements
Competent Authority

General
Transfer pricing is the term used to describe the basis upon which related parties make arrangements to charge for the transfer of tangible and intangible assets. Cross-border transactions between related parties are increasingly, subject to scrutiny by tax authorities determined to ensure that "tax leakage" does not arise in respect of transactions related to their respective jurisdictions. This has resulted in the introduction of transfer pricing legislation in various jurisdictions which require taxpayers to retain sufficient documentation to demonstrate that arm's length prices have been charged on related party transactions. Failure to comply with the legislation can result in the payment of interest on the late payment of tax and substantial penalties.

The Nexia Transfer Pricing Task Force consist of transfer pricing specialists who can assist you to develop a robust transfer pricing policy to develop and defend the prices to be charged on related party transactions.

Transfer Pricing Reviews
The Nexia Transfer Pricing Task Force will work with you to develop a proactive approach to transfer pricing policies. This would entail the use of economic research, comparable data, questionnaires and interviews to perform:

• Functional and Risk analyses
• Comparability studies
• Documentation
• Planning for cross-border transactions
• Dispute resolution with local tax authorities

Documentation
The Nexia Transfer Pricing Task Force can assist you to keep and preserve the relevant records needed to deliver correct and complete tax returns. Most tax jurisdictions require taxpayers to prepare documents prescribed in the OECD Model to include:

• the nature and terms of relevant transactions
• the methodology for determining the arm’s length prices for transactions
• adjustments made to prices to attain comparability
• contractual agreements and relevant comparability and commercial agreements

Global Tax Planning
The Nexia Transfer Pricing Task Force can assist you in setting up the appropriate domestic and international operating structures to:

• Optimise the tax rates for Group operations
• Optimise cash flow within the group
• Optimise synergies with the supply chain and operating structure

Dispute Resolution
A number of companies have adopted pricing policies that do not necessarily comply with the local regulations or have not been updated with respect to recent changes in the transfer pricing legislation either in the country of operation or other jurisdictions where its associates are located.

Such pricing policies may be subject to increased scrutiny by tax authorities. Potential disputes take up a substantial amount of management time and delay to resurrect the factual circumstances underlying the pricing policy.

The Nexia Transfer Pricing Task Force can assist companies to resolve their transfer pricing disputes and reduced the exposure to transfer pricing adjustments in the future. Our team consists of experienced practitioners who have extensive experience in dealing with tax authorities in respect of transfer pricing disputes.

Advance Pricing Agreements (APAs)
APAs are advanced agreements with Tax authorities on the acceptance transfer pricing methodology on a bilateral or multilateral basis.

The APA can be used to resolve complex transfer pricing issues where it is difficult to determine a suitable method for establishing an arm's length price or the transaction is so complex that the principles set out in the OECD model are not relevant to establish arm's length prices.

The APA application by a company sets out its understanding of how the transaction(s) is taxed leading to the negotiation with the relevant tax authorities to enter into a binding agreement. Such agreements can provide greater certainty to taxpayers.

Competent Authority
Under the mutual agreement article of double taxation agreements, taxpayers are permitted to obtain assistance from the competent authority where the action taken by a tax authority in one jurisdiction results in economic double taxation. Owing to globalisation, the number of such disputes having increased rapidly and required substantial time and resources for resolution.

The Nexia Transfer Pricing Task Force can assist you in dealings with competent authorities and the EU Arbitration convention.