Transfer Pricing

Transfer pricing is a frequent subject of tax audits, during which the audited companies face high additional income tax assessments, related penalties and default interest. Tax audits often end in a long and financially demanding court dispute. Fortunately, there is a way to prevent such a scenario, and that is the institute of a binding assessment of the method of determining transfer pricing (APA, abbreviation for Advanced Pricing Agreement). 

It is a proactive process initiated by the taxpayer (company), the aim of which is to conclude a preliminary agreement with the tax administrator confirming the correctness of the transfer pricing methodology for the given intra-group transaction. Thanks to this agreement, companies will be sure that transfer pricing is correct and will significantly reduce the risk of a tax audit. 

If you are not sure how to proceed, please contact us, we will be happy to help you.

Transfer pricing documentation is the basic means of defending the correctness of intra-group transactions in the event of a tax audit. Although it is not legally binding in the Czech Republic, by submitting the documentation, the company significantly strengthens its evidentiary position before the tax administrator. We will help you prepare local (so-called Local File) and group (so-called Master File) transfer pricing documentation and prepare related comparative analyses (benchmarks) containing the market profitability range relevant to the tested company.

If a company achieves an operating or total accounting loss and is also part of a group of companies, it is very likely to be targeted by the tax office. It examines whether this loss was caused by poor transfer pricing within the group and whether the loss incurred should have been compensated by the group. 

In these cases, we recommend preparing partial evidence in time and appropriate argumentation to defend the adequacy of the loss achieved within the identified functional and risk profile of the company. 

We know from practice that tracing back and gathering supporting documents, arguments and analyses only on the basis of questioning the tax administrator is very time-consuming and, moreover, expensive. We will be happy to help you prepare such arguments in a timely manner.

An OTP is a proactive approach to setting up transfer pricing. It consists of the accurate, transparent and effective implementation of the transfer pricing model into the company's accounting and internal systems based on high-quality input data, an efficient process and related controls. We will first help you revise the existing internal transfer pricing process, identify any shortcomings and then propose a solution that will lead to optimization, automation and setting up control mechanisms within the model. The resulting transfer pricing model, which we will prepare for you, can also be used as a management tool for group finance management and as a quality basis for planning.

Companies participating in intra-group financing must be able to demonstrate that they apply an interest rate that is in line with current market conditions. Given the relatively large fluctuation of interest rates on the financial markets in recent years, companies should always have up-to-date analysis available. 

We will help you set the right interest rates or fees for the guarantees provided and prepare for a potential tax audit. Please note that due to movements in financial markets and geopolitical changes, historical analyses may not be sufficient.

As part of the internal reorganisation of international groups, situations often arise where one company in the group gives up a certain value to another (e.g. in the form of a transfer of production or business function). In such cases, the tax office will be interested in whether the profit potential has been transferred to another company (especially in the case of cross-border transfers) and, if so, whether this change has been settled in accordance with transfer pricing rules. 

We will be happy to help you assess whether a particular intra-group restructuring requires compensation for the transfer of profit potential between the participating companies, including its determination. At the same time, we will provide you with assistance in gathering enough arguments for the financial (non-)settlement of such transfers, especially cross-border ones.

In the event of the emergence of new transactions or reorganization of existing relationships in the group, we are ready to map these new flows for clients, identify the tested parties to the transaction (companies) based on functional and risk profiles, propose appropriate methods for determining transfer pricing and provide clients with support in the implementation of the new transfer pricing model, including its documentation.

The tax deductibility of costs incurred for intra-group services or licence fees is one of the areas that are under frequent scrutiny by the financial administration. It is therefore essential to have a supporting documentation (so-called Defense File) that will contain evidence proving that the services or provision of rights to intangible assets are actually taking place and that the recipient of the services (or licenses) has a demonstrable economic benefit from them. 

For the efficient collection and sorting of documents, you can now use our unique cloud solution TP Tool, which systematically and continuously collects the necessary evidence for the given tax period for the purpose of proving the tax deductibility of costs within a tax audit. This will give you an immediate overview of current and historical periods and at the same time prevent any problems with the availability of evidence in the event of the departure of employees responsible for this agenda.

Effective Defense of Expense Deductibility (PDF) >

From 2024, large companies and groups with a turnover of more than €750 million are required to pay at least 15% effective income tax in the countries where they operate. We help large multinational groups assess the impact of global minimum taxation rules in the Czech Republic and set up an appropriate approach to their application. We will ensure compliance with related obligations towards the tax administrator and help you minimize tax risks in the changing international environment. Thanks to the global scope of the Deloitte network, we are able to ensure coverage of services in all countries of the world where the group/company operates and will deal with related obligations and their timely and correct compliance.