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.