In a changing transfer pricing landscape with increased regulation and tax authority scrutiny, it has never been more important to have effective and continuous implementation and monitoring of TP policies throughout an organization.
Operational Transfer Pricing (“OTP”) focuses on the details of how practical these policies actually are to implement for the business and the best way to do so. With this in mind, we have put together a series of short videos where Deloitte transfer pricing professionals outline the key points that you should know in respect to OTP and how Deloitte can best help your organization navigate to a successful solution.
Presenter: Sophie Brown, Tax partner, UK
Operational Transfer Pricing (“OTP”) provides confidence that the agreed-upon transfer pricing policies are actually happening on the ground, all around the world. This not only enables the business to implement these policies, but also to confirm that they are consistent in all the company’s records.
This area is under increasing scrutiny due to the BEPS project and tax authorities around the world testing, in detail, the actual outcomes of TP policies. Without a robust OTP system in place, organizations might not be able to implement TP policies consistently nor respond appropriately to TP audits.
For many companies, transfer pricing represents the largest tax risk if the company and tax authority cannot agree on the appropriate arm’s length price. This can result in large penalties from the tax authorities, which has implications not only on finances, but also on reputation in the market.
Presenter: Mark Carlton, Tax Director, Australia
Many firms and companies rely on the knowledge of individuals, outdated spreadsheets, and poorly defined processes. The possibility of audits, tax penalties, reputational damage and large costs due to inefficiency are just a few of the reasons why you might be thinking about OTP now, with the growing pressure to ensure your TP policies are correctly implemented.
At Deloitte we recognize that tackling the people, processes, control and data that underlie OTP can be a daunting task in a complex, global, constantly changing area. However, with a strong focus, right technology and good advice from our Deloitte team, it is possible to streamline and simplify it, with tangible benefits in terms of costs, transfer pricing risk and time. Deloitte can work with you to review, design and test intercompany processes that help streamline their execution, as well as create a tailored strategic TP advice that delivers organisational benefits.
Presenter: Ronan Ferry, Tax Partner, Ireland
While it can be tempting to rush straight into a technology solution, any technology-based solution will only be as good as the processes behind it, which for many organizations, may not be as streamlined or effective as hoped. When helping groups effectively deploy technology to support their OTP, we never look at the technology in isolation. We always need to understand the ‘people and processes’ component as well. That way, not only is it clear what ‘good’ looks like, it also becomes clearer what the best technology solution fit might be.
Deloitte can provide in-depth comparison and review of technology solutions, the pros and cons of each depending on each individual group’s requirements, and we can also help manage and support implementation from start to finish.
Presenter: Rahul Tomar, Tax Principal, US
Many countries now have a legal requirement to provide segmented P&Ls as part of TP documentation or as part of TP tax audits, while other countries are transitioning towards this or may already require companies to provide segmentations on an ad-hoc basis. Furthermore, scrutiny by tax authorities is also placed on the reconciliation between the figures disclosed within TP documentation and financial statements.
The challenging part comes from preparing timely and accurate P&L segmentation because it is required across multiple dimensions and needs a cost centre and key information from a variety of sources too. Being able to prepare segmented P&Ls allows better control over profit and cost allocation which ultimately establish the basis of the tax control framework.
Presenter: Annelies Dieusaert, Tax Partner, Belgium
The fifth video of the OTP video series looks at the common pain point that faces many organizations, the difficulty in producing segmented P&Ls, and we discuss how we have helped a multinational client automate this process enabling them to have in-year visibility of the implementation of TP policies.
Presenter: Mudit Kapoor, Tax Partner, US
Using year-end or post year-end adjustments to manage transfer pricing policy is becoming less and less acceptable. Tax authorities may allow additional tax to be paid, but not overpaid tax to be recovered. In addition, these adjustments can create irrecoverable costs in terms of additional customs duties and VAT and they also generate an impression of poor control by the business over its transfer pricing arrangements.
Accurate and timely calculations of profitability are the best tool available to monitor transfer pricing throughout the year.
Presenter: Stephen Losavio, Tax Partner, US
In the last video of the OTP series we present another case study which looks at profit monitoring, another common OTP pain point, and how we have helped a multinational organisation implement an integrated solution that enables in-year monitoring and the ability to determine TP adjustments in a more-timely manner.