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Nexia Ebner Stolz

Tax Advice

Digital Transfer Pricing Management: Quality Assurance and Improved Efficiency

Pro­fit allo­ca­tion and thus the tax bur­den wit­hin a group of com­pa­nies can be acti­vely struc­tu­red using trans­fer pri­cing. For this rea­son, the hurd­les for the tax recogni­tion of trans­fer pri­ces have become much hig­her world­wide over the past few years. The cur­rent chan­ges in the rules gover­ning trans­fer pri­cing docu­men­ta­tion are also the result of this deve­lop­ment.

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Fol­lo­wing on from the BEPS (base ero­sion and pro­fit shif­ting) pro­ject of the OECD/G20 coun­tries, the Ger­man legis­la­ture has inc­rea­sed the mini­mum stan­dards for trans­fer pri­cing docu­men­ta­tion. For example, com­pa­nies that gene­ra­ted sales of at least EUR 100 mil­lion in the pre­vious fis­cal year are requi­red to create a mas­ter file from 2017 onwards. This docu­ment must describe the overall struc­ture of the group and dis­c­lose its trans­fer pri­cing policy. A parti­cu­lar focus is on the pre­sen­ta­tion of int­an­gi­ble assets that are essen­tial for the Group's crea­tion of value.

As in the past, all com­pa­nies, regard­less of their sales, must create a "local file" sho­wing that their trans­fer pri­ces in tran­sac­ti­ons with affi­lia­ted com­pa­nies are appro­priate.

A new requi­re­ment, howe­ver, is the obli­ga­tion for the Group's parent com­pany to draw up a "coun­try-by-coun­try report," pro­vi­ded that the Group's con­so­li­da­ted sales are at least EUR 750 mil­lion. In parti­cu­lar, this report gives an over­view of various key figu­res (e.g. num­ber of emp­loyees, sales, pro­fits or taxes paid), bro­ken down by tax juris­dic­tion. These key figu­res are inten­ded to enable the tax aut­ho­ri­ties to deter­mine where a more tho­rough exa­mi­na­tion is necessary.

More­o­ver, in the future there will be inc­rea­sed cross-bor­der coope­ra­tion bet­ween the tax aut­ho­ri­ties, as one of the objec­ti­ves of the OECD's BEPS pro­ject is to inc­rease tran­s­pa­rency in the taxa­tion of groups that do busi­ness inter­na­tio­nally. To this end, the Federal Repu­b­lic of Ger­many and many other coun­tries have com­mit­ted them­sel­ves to inc­rea­sin­gly exchan­ging infor­ma­tion that is rele­vant to taxa­tion. This inclu­des auto­ma­ted exchange of coun­try-by-coun­try reports as well as inc­rea­sing coope­ra­tion in cross-bor­der joint audits.

Against the back­drop of these deve­lop­ments, con­sis­tent inter-coun­try trans­fer pri­cing docu­men­ta­tion is beco­ming inc­rea­sin­gly important. A furt­her com­p­li­ca­ting fac­tor is that the dead­li­nes for repor­ting acco­un­ting-rela­ted infor­ma­tion vary from coun­try to coun­try. The fact that the dead­li­nes are much shor­ter in cer­tain other coun­tries means that an ongoing docu­men­ta­tion pro­cess must be imp­le­men­ted for all com­pa­nies in a group, in order to avoid inac­cu­ra­cies in the pre­sen­ta­tion of intra-group busi­ness rela­ti­ons. This will be no mean feat, since cor­po­rate and juris­dic­tion struc­tu­res vary widely!

For this rea­son, the indi­vi­dual parts of the com­pany must work clo­sely toge­ther to meet these requi­re­ments, which are both time-con­su­ming and com­p­li­ca­ted. Cen­tral coor­di­na­tion is essen­tial.

The way to ensure a high-qua­lity and effi­ci­ent infor­ma­tion pro­cu­re­ment and docu­men­ta­tion pro­cess throug­hout the ent­ire com­pany is to imp­le­ment a world­wide soft­ware solu­tion. Thus, for example, Ebner Stolz uses a digi­tal trans­fer pri­cing mana­ge­ment tool. In addi­tion to crea­tion and cen­tral sto­rage of all docu­men­ta­tion requi­red for local pur­po­ses world­wide, the tool also makes it pos­si­ble to map and moni­tor the crea­tion pro­cess and the respec­tive res­pon­si­bi­li­ties.

The use of the digi­tal trans­fer pri­cing mana­ge­ment tool does not require time-con­su­ming and costly imp­le­men­ta­tion in the com­pany's IT sys­tem land­s­cape. Rather, it is hos­ted by Ebner Stolz in Ger­many in accor­dance with the Federal Data Pro­tec­tion Act. The tool can then be acces­sed via a web-based inter­face by aut­ho­ri­zed per­sons all over the world. In addi­tion, it can be con­fi­gu­red to meet the indi­vi­dual needs of each com­pany.

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