As an entrepreneur with branches and group of companies abroad, you get more often involved with demands in terms of “transfer price” or either the pricing of the units of the enterprise which are calculated altogether for a mutual delivery of goods and services. The main purpose of the tax authority is the establishment of the price for this mutual delivery which is intended as a business price. By a businesslike approach of pricing, the Dutch and foreign taxes authorities as well want to control if the concerned countries fulfill with the reported results and to make sure that no profit is released in a false manner.
There is a lot of attention in the press but on behalf of the tax authority as well.
During the last years, great companies such as Starbucks, Apple were focused in the news due to the use of taxes-saving constructions. These companies observe the legal rules tidy, but the outcome of the treasury was not qualified by everyone as reasonable. In an attempt to increase the tax revenue of multinationals, the tax laws and regulations change hereby always intricately. Therefore; it is more important for international operating companies to have all issues concerning transfer pricing clarified. The inquiry is not actually “if” the tax authority will raise questions hereby but “ when”
Special situation get special attention
Other than the normal enterprise’s activities and the related transactions, the tax authority considers namely the professionalism of the following transactions as well:
- Intern reorganization in which the functions of the company’s business units are moved from one country to another, or the closing of a company.
- Loan agreements between the different units of the group, especially if write-off or debiting take place in such loan.
- The use of intellectual ownership such as mark rights or know-how from one Holding company to the rest of the units of groups, for example granting mutual licenses.
- The cross charging of the main office costs to different company’s units.Always loss calls for questionsThe discussion with the tax authority about the (‘transfer pricing’) takes place if there is a structural loss-making activities (would the independent enterprise have not ceased long ago?) a strong profit fluctuation (Do such fluctuations match with the nature of the enterprise of that company unit?)
Your answer is ready to find the desk drawer.
Owing to the great importance (and the attention which is namely paid by the tax authority through controlling), the most international operating companies choose a method upon which the mutual prices are calculated and confirmed well. Because the “professionalism “ is open for argument, many entrepreneurs choose also to compare the price setting (benchmarks) with the world outside by means of a transfer pricing data base. In this data base there are millions of companies listed which carry out comparable transactions. This is an important test for the entrepreneur as well to control if the profit marge of a transaction in the future may possibly lead to a discussion with the tax authorities.
From Strategy to documentation
We can help you with setting up your transfer pricing strategy and documentation. We have vast experience with most countries and we can assist you for example with acquiring the “ruling” of the tax authority. Furthermore, the transfer pricing can also be used for reducing the tax burden worldwide. We are gratefully prepared to offer you an enormous insight in our services during an unbinding discussion.