Services
We provide the full spectrum of international transfer pricing advice and advocacy services, including:
Planning & Policy Development
Whether you’re entering an overseas market for the first time (and don’t even know where to start!) or whether you’re a seasoned campaigner looking for a fresh perspective on ways to rationalize a mishmash of different transactional policies which have amassed over many years of international acquisitions/expansion, we can help.
We’re committed to investing the time it takes to really understand your situation so that we can develop tailored solutions that are both defensible and properly aligned with your tax objectives. We can see the world from your perspective, whether you’re based in Australia or the USA, we understand your tax environment.
The most important part of any planning or policy review project is understanding and documenting the critical facts/assumptions regarding the relevant functions performed, assets used and risks assumed/managed. This is typically achieved through conducting interviews with key personnel and performing further analysis to identify, and understand the implications of, the true economic substance underlying the cross-border business activities/relations.
The reason that this fact gathering and analysis is so important is that the information obtained, and inferences drawn therefrom, provide the basis for:
Forming an opinion as to the economic characterization of each entity in respect of the cross-border related party business relations (i.e. deducing the nature and substance of the relationship between the related parties, e.g. principal/agent, entrepreneur/service provider etc.); and
Identifying the character/nature of the transactions to be recognized between the relevant related party entities (e.g. provision of services, sale of goods or use of intangible assets), and “best”/most appropriate transfer pricing method(s) for pricing/reviewing these transactions;
The facts observed/obtained and analysis performed in the course of planning/policy development will also need to be included in the transfer pricing documentation file and may be relevant for performing additional procedures and analysis required to satisfy a particular country’s requirements (e.g. a comparability analysis and an external comparables benchmarking search).
Once the outcomes/transactions to be recognized under the policy have been identified, various implementation options can be considered. As part of this consideration, non-transfer pricing tax issues associated with different options (e.g. potential BEAT, CFC, FDII, GILTI, PE or WHT issues, GST/sales tax/VAT issues and custom duties) can be identified for further evaluation.
After the non-transfer pricing tax issues have been evaluated/resolved and the preferred implementation option determined, it is best practice to perform benchmarking/economic analysis in order to facilitate reliable application of the selected transfer pricing method to calculate the transaction values/profit outcomes to be recognized in the financial accounts of the relevant group companies.
While not all businesses perform benchmarking/economic analysis as part of planning and policy development, most countries require that some form of benchmarking/economic analysis be included in the local transfer pricing documentation file (prepared no later than the time of lodging the corresponding income tax return).
Policy Implementation Assistance
We can help out with a range of policy implementation issues, from drafting pricing clauses/schedules for incorporation into intercompany legal agreements, helping finance/tax personnel identify appropriate cost allocation keys for management service charges to reviewing calculations for periodic true-up adjustments (for businesses relying on profit based transfer pricing methods).
Transfer Pricing Documentation (Penalty Mitigation)
Subject to any local materiality concessions, most countries require that businesses with cross-border related party business relations prepare (and must be able to provide to revenue/tax authorities upon request) transfer pricing documentation that evidences the facts and circumstances considered and methods/data relied upon to demonstrate that the relevant cross border related party business relations are consistent with the arm’s length standard.
Suffering a transfer pricing adjustment and having to cover a tax shortfall is not a pleasant experience. However, having to pay arduous penalties over-and-above the primary tax liability for not maintaining contemporaneous documentation can be downright painful – and only adds insult to injury. Both Australia and the USA impose substantial penalties for not maintaining the required documentation - under Division 284 of Schedule 1 to the Tax Administration Act and Section 6662 of the Internal Revenue Code, respectively.
The nature and extent of documentation required varies by country with some countries, like Australia and New Zealand, taking a more principled approach while others, like the USA, having far more prescriptive requirements.
We know the lay of the land on both sides of the Pacific so we can help you create/adapt your group transfer pricing documentation to meet the specific requirements of each country (e.g. addressing the Australian Taxation Office’s “five questions” in TR 2014/8 or including the “ten principal documents” promulgated by US Treas. Reg. 1.6662-6(d)(2)(iii)).
Benchmarking/economic analysis
Most countries require that some form of benchmarking/economic analysis be included in the local transfer pricing documentation file. Essentially, benchmarking is the economic support that the actual conditions of cross-border related party business relations are consistent with arm’s length conditions (including the procedures for identifying/ selecting empirical data for use as comparables).
The selection of empirical data is based on the facts and circumstances identified from performing a thorough comparability analysis of the cross-border related party business relations. A documented comparability analysis is a key requirement under the documentation standards of Australia and the USA.
The empirical data selected to approximate arm’s length conditions may take the form of observations on profit margins, transactional prices or interest rates – depending on the method being applied and nature of transaction(s) being priced/reviewed.
Whatever your situation may be, we’ve got the experience to perform (or guide you through) the benchmarking/ economic analysis required in your particular circumstances.
Training & Capacity Building
We are able to provide both group/team training sessions/workshops as well as ongoing one-on-one capacity building/mentoring for staff members looking to develop a specialization in transfer pricing.
Please contact us to find out more about how we can meet your training needs.
Responding to Revenue/Tax Authority Reviews, Audits & Disputes
Revenue/tax authorities around the world are becoming increasingly sophisticated and vigilant in identifying potential “targets”, conducting reviews and challenging the pricing/profit outcomes of cross-border related party business relations.
Properly managing any enquiries/reviews from the outset can make the difference between enduring years of painful audit information requests and receiving a “clean bill of health” letter shortly after the first meeting with the investigating authority.
Whenever you’re responding to a transfer pricing related enquiry from a revenue/tax authority, it must be appreciated that the investigating team may know next to nothing about your business/industry. As such, it is often necessary to provided additional clarification and context in responding to seemingly discrete questions in order to put the recipients in a position to fully appreciate the business rationale behind your pricing policies. You should be asking: are our responses to these questions giving rise to even more questions and are they capable of being misconstrued by someone unfamiliar with our organization? An outside perspective can be very helpful in seeking to answer these questions.
We can guide you through any revenue/tax authority investigation or dispute. Whether it is simply a matter of responding to an initial risk assessment questionnaire or whether the dispute has already come to the stage where you’d like another opinion on a revenue/tax authority’s adverse position paper/summary of proposed adjustments to help inform your decision around whether or not to litigate, our experienced professional staff are here to support you throughout the process (including attending meetings with the investigating team with you).