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Editor's Choice

Intercompany Transfer Pricing

“Companies must make sure that there is regular exchange between the chief
tax officer and the business persons, the persons in charge of transfer pricing
and the accountants.”

Philippe Neefs is a Partner at KPMG Luxembourg since 2007 and advises on both international tax structures and transfer pricing. Speaking of transfer pricing, he has participated in the implementation of the first transfer pricing regulation in Luxembourg and has set up the KPMG Luxembourg transfer pricing department since then.

Sophie Boulanger is a transfer pricing senior manager at KPMG Luxembourg. She participates in the development of the transfer pricing practice. 

They both assist their clients with their transfer pricing manuals, local as well as global transfer pricing documentation but also with transfer pricing planning linked to the international structures implemented through Luxembourg. They are regularly involved in advance pricing agreement (APA) discussions with the tax authorities, both unilateral and bilateral.

Q. What challenges can often arise when dealing with intercompany transfer pricing?

The main challenge we are facing is that the taxpayer does not have a uniform transfer pricing policy applied coherently within his group. Along with this, some groups do have a lack of documentation. Getting timely and reliable information is not a given item.

Besides those usual challenges, we encounter more and more complex transactions where the traditional transaction methods (comparable uncontrolled price, cost plus or resale minus) do not allow to find accurate comparables and where a transactional profit method like the profit split must be used. This becomes more common for banking and investment fund transactions and obviously for transactions with intangibles.

Q. How might these be addressed or avoided entirely?

With respect to transfer pricing policy and documentation, international groups will anyway have to move for better quality as a consequence of the recommendations of action 13 of the Base Erosion and Profit Shifting Action Plan issued on 18 September 2014. The new guidance recommendations confirm that the OECD is focusing on a three-tiered approach for documentation (a master file, a local file and a country-by-country report). The information being combined, they can be considered as an assessment tool for tax authorities in order to carry out in-depth tax audits.

Q. How should companies deal with transfer pricing disputes?

The best advice…

Read the full interview in the October 2014 edition of Finance Monthly Magazine


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