Transfer pricing is a frequently discussed tax matter in whole European Union. It´s basic purpose is to establish the rules and methods for pricing transactions between enterprises under same ownership or control.
The arm’s length principle
In transfer pricing, it is important to observe the arm's length principle applied to related party transactions. This principle states that the price charged in a controlled transaction between two related parties should be the same as that in a transaction between two unrelated parties on the open market.
The arm's length principle has been adopted by all OECD countries. It provides a key guideline for multinational corporations and tax administrations on cross-border taxation issues. Its aim is to prevent the erosion of the tax base and the transfer of profits to low-tax jurisdictions.
In transactions between independent companies, the terms of exchange, such as the price of goods or services, are usually dictated by market forces. In contrast, in transactions between related parties, prices may be influenced not only by market forces but also by internal factors such as:
- Corporate synergy: cooperation between related parties can generate savings and efficiencies, which can lead to lower prices in internal transactions;
- Economy of scale: joint production or distribution by related parties can lead to lower unit costs, which can also affect prices in internal transactions;
- Tax planning: related parties may use transfer pricing to optimise their tax burden, which may lead to deviations from market prices.
Below you may find some of the key transfer pricing benefits:
Transfer pricing documentation - comprehensive services from Crowe
To meet the growing needs of the market, Crowe experts have prepared a package of services including comprehensive support and advice for companies in preparation transfer pricing documentation and comparative analyses (i.e. benchmarks). With years of expertise, we guide medium and large domestic and international groups through the complexities of transfer pricing documentation, ensuring compliance with OECD and Slovak tax administration recommendations.
Thanks to our advisors, the tax risks will be eliminated because the prepared documentation will be fully compliant with local statutory requirements and transfer pricing regulations. As a standard service, we will also provide some advice on the choice of transfer pricing policy tailored to the individual needs as well as the specifics of the international company.
Transfer pricing policy - a tool for business success
It should be emphasized that in addition to mitigating risks, a thoughtful transfer pricing policy can contribute to the achievement of business objectives across the entire group. It therefore becomes a tool for conducting effective business operations.
Transfer pricing - scope of the services:
- Preparation of the transfer pricing documentation
- Revision of the existing documentation and its adaptation according to the local statutory requirements
- Preparation of comparative data analysis (i.e. benchmarking analysis)
- Recommendations in terms of selecting a suitable transfer pricing method and strategy based on client‘s business structure and individual needs
- Verification of the correctness of the current price calculation between related parties from a tax point of view
- Representation of a client in case of an inspection from the tax authorities
- Workshops and trainings on transfer pricing
- Advisory services
