Transfer Pricing (TP)

Al vanaf 7 deelnemers kunnen wij deze cursus tegen een zeer aantrekkelijke prijs in-company bij u organiseren. Dit kan zowel volledig mondeling, schriftelijk of in een combinatie van beide zijn. Neem contact met ons op voor de mogelijkheden.

LESSON I
Introduction

You will be introduced to the context of the transfer pricing process and some of the basic principles, terminology and methodologies used in the field of transfer pricing. The subsequent lessons will address the principles in-depth. This lesson will describe the context of the transfer pricing process from a practical perspective. The process will introduce you to connect theory and practice so that you are able to apply relevant legislation to draft a transfer pricing document that is compliant with the requirements. Appropriate transfer pricing documentation ensures compliance with applicable legislation and reduction of risk exposure to penalties. 

LESSON II
Documentation Requirements: regulatory context: Transfer Pricing

You will find guidance in respect of the transfer pricing rules in certain regions such as the European and Asia-Pacific region. Transfer pricing rules find their origin in the OECD Guidelines or PATA Guidelines that have set the general standards for transfer pricing. This lesson provides an overview of transfer pricing rules on a regional basis, with a high-level discussion of these regional transfer pricing rules.
This part explains about legal aspects in relation to the documentation requirements for taxpayers in order to demonstrate the tax authorities that inter-company transactions are carried out on an arm’s length basis.

This part is based on the OECD Transfer Pricing Guidelines, PATA Guidelines and the working document that was prepared by the EU Joint Transfer Pricing Forum and resulted in a Code of Conduct on transfer pricing documentation for associated enterprises in the European Union. Topics addressed include:

• the purpose of transfer pricing documentation;
• the burden of proof regarding the arm’s length nature of inter-company transactions;
• the content of good and effective documentation, and
• the approach followed by the Commission of the European Communities on EU-wide transfer pricing documentation.

With regard to European documentation, the differences between documentation by means of a so-called ‘Masterfile’ and country-specific documentation will be discussed, including scope and content of both types of documentation.

LESSON III
Documentation Requirements: Regional and Country Specific

You will read about the transfer pricing rules in certain countries. As already mentioned, transfer pricing rules find their origin in the OECD Guidelines that have set the general standards for transfer pricing. Multiple countries have adopted these principles, introducing specific local rules that may, sometimes significantly, deviate from the OECD concepts. This part provides an overview of transfer pricing rules on a country-by-country basis, with a high-level discussion of the various localized transfer pricing rules. Countries that will be dealt with include China, Germany, Japan, the United Kingdom, India, Latin America and Australia.

LESSON IV
Design and Implementation of a Transfer Pricing Policy

You will learn the basics of design and implementation of a transfer pricing policy, for example how the operating margin is allocated to each of the companies within the MNE. The key action point is to translate the roles and responsibilities of a related entity into an appropriate compensation method. I.e. where a sales operation in Country A acts as a profit centre, poor management of its operations could put the affiliate in country A into a loss-making position. A profit centre tends to be compensated on a gross margin basis. The implementation – e.g. drafting intra-group agreements – has to reflect as accurately as possible the design of the transfer pricing system.

LESSON V
Transfer Pricing Documentation in Practice

Through various case studies, the ‘hands on’ transfer pricing is being displayed. This section includes work plans, timelines and work flows written by experienced transfer pricing specialists.

LESSON VI
Transfer Pricing (pre-) Controversy Management

Lesson 6, Transfer Pricing (pre-) Controversy Management enters into audits, going to court, Advance Pricing Arrangements (APAs), Mutual Agreement Procedures (MAPs, often referred to as Competent Authority Procedures), and the EU Arbitration Convention. The common theme of these topics is dispute avoidance and dispute resolution: in each process from initial audit to going to court or entering into arbitration, a settlement with the tax authorities involved will have to be reached with regard to the transfer pricing method and model (to be) applied. With respect to the audits and going to court common practices are discussed as well as landmark transfer pricing court cases. The APA is a proactive instrument: it enables taxpayers to obtain certainty in advance about intra-group transactions that have not yet occurred and thus minimizing the risk of controversy. Both the MAP and the procedure from the EU Arbitration Convention are applicable, only if the tax authorities involved do not agree to the transfer pricing method or model used for a certain inter-company transaction, and have instituted, or announced the institution of an additional assessment.

As a consequence of the increased attention for transfer pricing, both from a governmental and a corporate perspective, more and more taxpayers are entering into an APA procedure in order to proactively manage the main transfer pricing risks as well as to explore the opportunities of such a procedure in an effective way. In this part of the course, the main principles of the APA regime, the MAP process and the process under the EU Arbitration Convention will be dealt with.

LESSON VII
Transfer Pricing Project and Risk Management

Transfer Pricing Project and Risk Management provides you with an insight into the practical aspects of managing a transfer pricing project and managing transfer pricing risks. Before starting an exercise to design and implement a transfer pricing policy, the MNE might want to check what the tax risk is by conducting its own risk assessment. In order to assess the risk it can be useful to gain insight in how Tax Authorities make a pre-assessment of the transfer pricing risks. The Australian Tax Authorities (ATO) for example decides whether to proceed to a transfer pricing audit by looking at the status of the two following variables within the company under pre-assessment:

• The quality of the company’s processes and documentation, and the commercial realism of their outcomes.
• The quality of a company’s processes and documentation can generally be assessed as falling into broad categories, ranging from low, which will increase the likelihood of an audit, to high, which will decrease the likelihood of an audit. To decrease the possibility of an audit, a company should have processes that allocate income and expenses in accordance with the arm’s length principle.

LESSON VIII
Special File: Types of Inter-Company Transactions

Special File: Types of Inter-Company Transactions will go into more detail regarding all the various types of inter-company transactions that occur in practice and their treatment from a transfer pricing perspective. Transactions addressed include:

• headquarter type of services such as management support, finance and administrative support, HR support and IT support;
• centralised procurement;
• (contract) manufacturing;
• logistics, and
• sales and marketing.

LESSON IX
Special File: Intellectual Property (IP)

Special File:Intellectual Property (IP) will go into more detail regarding the specifics of inter-company transactions involving IP and their specific treatment from a transfer pricing perspective. In Lesson 9 we will start by defining IP. As there is no single definition of IP in use today by tax authorities or the OECD, we provide a framework in order to capture the various characteristics of IP. Next, we touch upon the methods that have been provided by the OECD to establish arm’s length pricing or valuation of intra-group transactions of IP, as well as the practical implementation of these methods. Following the methodology, we illustrate developments in the area of IP by means of a discussing landmark court cases.

Lesson 9 will conclude with a couple of multiple choice questions to test your basic knowledge of IP and how it is treated from a transfer pricing perspective. A list of recommended literature will also be included at the end of this lesson.

LESSON X
Special File: Business Restructuring and Valuation

This part will address transfer pricing issues related to a change of the supply chain that aims at arriving at a beneficial business model (conversion) and the valuation issues that are related to those changes. Ultimately, the decision on a new business model should be driven by business objectives. At the same time, certain tax objectives can be met if the tax implications are recognized and managed in the (pre-)restructuring phase. In this way, a result could be achieved that enhances both business goals and tax management.

Tax implications become relevant, if upon restructuring a reallocation of functions and risks is effectuated. Tax authorities may take the position that a so-called ‘exit charge’ (or deemed goodwill transfer) should be added to taxable profits when the earning potential of a taxpayer is reduced by such a reallocation. Closing profitable business operations, and restarting them in low-cost regions in particular, generate goodwill issues that must be analyzed thoroughly. Lesson 10 will address the issues described above primarily from an economic perspective. In addition the latest developments regarding the OECD discussion draft on business restructurings will be discussed. Furthermore, case-study examples will be introduced to discuss opportunities and risks in the area of tax-aligned supply-chain restructurings.

LESSON XI
Special File: Customs

This part will address the following topics:

• Differences in the aims and objectives of the two sets of rules for Transfer Pricing and Customs;
• Unilateral responses: the example of the US response;
• The debate at the international level (OECD-WCO-WTO) and the case for achieving converging standards;
• Divergences between transfer pricing systems and customs laws with regard to:
  -  'related party' concept;
  -  methods of valuation, and
  -  documentation requirements
• Price adjustments and the approach of tax authorities in relation to direct taxes and customs authorities.

N.B. All lessons will conclude with multiple choice questions to test your basic knowledge. A list of recommended literature will also be included at the end of each lesson.