Nexia Ebner Stolz

Transfer Pricing

Are you a globally operating company? Do your domestic and international group companies and branches continuously exchange substantial quantities of goods and services? If so, you should pay particularly close attention to how you design and document transfer prices for these cross-border intragroup supply relationships.

Are you a glo­bally ope­ra­ting com­pany? Do your domestic and inter­na­tio­nal group com­pa­nies and bran­ches con­ti­nuously exchange sub­stan­tial quan­ti­ties of goods and ser­vices? If so, you should pay parti­cu­larly close atten­tion to how you design and docu­ment trans­fer pri­ces for these cross-bor­der intra­group sup­ply rela­ti­onships. Tax admi­ni­s­t­ra­ti­ons at home and abroad regu­larly put the spot­light on these issues and gene­rally view them in a very criti­cal light.

Clean trans­fer pri­ces?

Most govern­ments have adop­ted spe­cial regi­mes to pre­vent inter­na­tio­nal groups of com­pa­nies from exp­loi­ting poten­tial loo­pho­les that could reduce the tax reve­nue of the coun­tries con­cer­ned. These rules sti­pu­late the con­di­ti­ons under which trans­fer pri­ces are accepta­ble for tax pur­po­ses. The arm’s length prin­ciple has emer­ged as the inter­na­tio­nal con­sen­sus bench­mark for these rules. This inter­na­tio­nal approach is desig­ned to ensure that the sub­stance of the indi­vi­dual natio­nal regi­mes does not dif­fer to such an extent that the out­come is eit­her dou­ble taxa­tion or non­ta­xa­tion. Com­p­lying with this arm’s length prin­ciple and docu­men­ting com­p­li­ance pose con­s­i­de­ra­ble chal­len­ges in practice for com­pa­nies.

Clear about trans­fers of func­ti­ons?

Espe­cially middle-mar­ket com­pa­nies often expe­ri­ence very dyna­mic growth - in parti­cu­lar when it comes to the struc­ture of their inter­na­tio­nal busi­ness. In many cases, they only seek tax exper­tise if there are chan­ges to the struc­ture of the group under com­pany law. By con­trast, the tax dimen­sion is fre­qu­ently unde­re­sti­ma­ted in the case of purely orga­niza­tio­nal chan­ges in the group wit­hout any legal con­se­qu­en­ces. The cri­te­ria for a “tax trans­fer of func­ti­ons” may also be met in cases like this. This nor­mally results in con­s­i­de­ra­ble tax lia­bi­li­ties and can end­an­ger the pro­fi­ta­bi­lity of a restruc­tu­ring or orga­niza­tio­nal pro­ject.

Docu­men­ta­tion requi­re­ments satis­fied?

Your com­pany must docu­ment all intra­group sup­ply rela­ti­onships in detail so that the tax admi­ni­s­t­ra­ti­ons can exa­mine trans­fer pri­ces and trans­fers of func­ti­ons. It is not enough merely to describe the exis­ting sup­ply rela­ti­onships and the trans­fer pri­ces app­lied, as well as the metho­do­logy used to cal­cu­late them. Rather, you must demon­s­t­rate they are veri­fia­bly appro­priate, mea­ning that they pass the arm’s length test. And there’s more: Com­pa­nies that don’t com­ply with the docu­men­ta­tion requi­re­ments and the rela­ted filing dead­li­nes will gene­rally face pain­ful penal­ties, both in Ger­many and abroad.

Can we help you?

The topic of trans­fer pri­cing is very wide-ran­ging and ext­re­mely com­plex. In light of the con­s­i­de­ra­ble impact it can also have on non­tax areas, it demands a well thought out, holistic approach that con­s­i­ders all the rele­vant aspects and ref­lects them appro­pria­tely. It is also vital to ensure that the sys­tem can be cre­di­bly exp­lai­ned to tax admi­ni­s­t­ra­ti­ons at home and abroad and can be defen­ded in any tax audits. We would be plea­sed to sup­port you in these acti­vi­ties so that you can bene­fit from our expe­ri­ence in all kinds of sce­na­rios and pro­jects. We focus sys­te­mati­cally on the spe­ci­fic requi­re­ments and fea­tu­res that cha­rac­te­rize and shape your orga­niza­tion.

Our ser­vices at a glance

  • Sup­port for pri­cing cross-bor­der sup­ply rela­ti­onships that ref­lects all tax aspects (e.g., VAT, customs duties, acco­un­ting)
  • Health check for the exis­ting trans­fer pri­cing docu­men­ta­tion and trans­fer pri­cing sys­tem
  • Design of inter­na­tio­nally coor­di­na­ted, sup­por­ta­ble trans­fer pri­cing models that are tai­lo­red to your com­pany, inclu­ding imp­le­men­ta­tion sup­port (e.g., draf­ting con­tracts, hol­ding work­shops, draf­ting instruc­ti­ons and poli­cies, imp­le­men­ting pro­ces­ses and pro­cess descrip­ti­ons, deve­lo­ping tem­pla­tes)
  • Sup­port for pre­pa­ring trans­fer pri­cing docu­men­ta­tion - both in indi­vi­dual areas (e.g., pre­pa­ring the func­tio­nal and risk ana­ly­sis, or the arm’s length ana­ly­sis) or in all areas (e.g., sup­port for the mas­ter file con­cept or for pre­pa­ring docu­men­ta­tion nee­ded only for Ger­man pur­po­ses)
  • Defini­tion of the KPIs for the indi­vi­dual tran­sac­tion types, inclu­ding bench­mar­king if app­lica­ble, nee­ded for the arm’s length docu­men­ta­tion
  • Defen­ding your trans­fer pri­cing model in tax audits
  • Sup­port for appeals in liti­ga­tion or out-of-court pro­cee­dings rela­ting to tech­ni­cal trans­fer pri­cing issues
  • Arran­ging mutual agree­ment pro­ce­du­res to eli­mi­nate eco­no­mic dou­ble taxa­tion that could result from trans­fer pri­cing adjust­ments by domestic or for­eign tax admi­ni­s­t­ra­ti­ons
  • Imp­le­men­ting advance pri­cing arran­ge­ments (APAs)
  • Expert opi­ni­ons on com­plex issues
  • Coor­di­na­tion/agree­ment with your advi­sers/col­lea­gues abroad or with our col­lea­gues in Nexia Inter­na­tio­nal.

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