Global Transfer Pricing Conference

Size: px

Start display at page:

Download "Global Transfer Pricing Conference"

Hollie Gibbs
5 years ago
Views:

1 Managing multiple stakeholders in the new economy Global Transfer Pricing Conference Enhancing the effectiveness of the TP function

2 Today s presenters David Nickson Annie Devoy Kathryn O Brien Arthur Mendoza Slide 2

3 Agenda Introduction Strategic risk assessment TP execution a people function Typical pitfalls Slide 3

4 Introduction Slide 4

5 Introduction Strategic Vision - Define global policies, set priorities, extend external leadership Training and Technology - Provide internal training, develop IT resources Risk Assessment - Fit for purpose review of policies, internal audit of transactions, high risk/high volume transactions, consider benefits analyses, tension with regulatory or other considerations, review practices for planning opportunities Implementation - Identify key stakeholders, institutionalize process, test implementation Planning/Documentation - Develop tools and templates, team with other disciplines, streamline search processes, develop master files, create quality controls Slide 5

6 Risk assessment Slide 6

7 Strategic risk assessment: everybody s doing it Tax audits are an everyday occurrence in almost all major developed and emerging Information sharing among tax authorities is dramatically increasing OECD: Transfer Pricing Risk Assessment Handbook, Base Erosion and Profit Shifting Action Plan etc. Disclosure requirements are proliferating - e.g., reporting of uncertain tax positions (UTPs) in the U.S. Tax authorities are using new audit techniques e.g., Joint Audits, foreign visits, and SWAT Teams. Some countries are adopting aggressive unprincipled positions, including attempts to extend taxing jurisdiction by emerging countries Slide 7

8 Focusing on risk areas Slide 8

9 INPUTS Brand Owner Royalty UK/US Royalty UK Entity Operating Expenses US Entity Operating Expenses OpCo Return (net) Profit split scenario % 8.00% 3.00% 0.50% 12.00% Profit split scenario % 8.00% 3.00% 0.50% 10.00% Profit split scenario % 8.00% 3.00% 0.50% 15.00% Profit split scenario % 8.00% 3.00% 0.50% 8.00% Profit split scenario % 10.00% 3.00% 0.50% 10.00% Profit split scenario % 12.00% 3.00% 0.50% 10.00% Results System profit Brand Owner OpCo UK Entity US Entity System total Profit split scenario % Absolute share of total system profits 1.50% 12.00% 3.50% 3.00% 20.00% Proportional share of total system profits 7.50% 60.00% 17.50% 15.00% % US / UK profit ratio 53.85% 46.15% % Profit split scenario % Absolute share of total system profits 1.50% 12.00% 3.50% 8.00% 25.00% Proportional share of total system profits 6.00% 48.00% 14.00% 32.00% % US / UK profit ratio 30.43% 69.57% % Profit split scenario % Absolute share of total system profits 1.50% 12.00% 3.50% 13.00% 30.00% Proportional share of total system profits 5.00% 40.00% 11.67% 43.33% % US / UK profit ratio 21.21% 78.79% % Profit split scenario % Absolute share of total system profits 1.50% 12.00% 3.50% 18.00% 35.00% Proportional share of total system profits 4.29% 34.29% 10.00% 51.43% % US / UK profit ratio 16.28% 83.72% % Profit split scenario % Absolute share of total system profits 1.50% 12.00% 3.50% 23.00% 40.00% Proportional share of total system profits 3.75% 30.00% 8.75% 57.50% % US / UK profit ratio 13.21% 86.79% % Slide 9

10 TP execution a people function Slide 10

11 TP execution a people function Risks Legal Tax Controllership / Operations Transfer pricing strategy and related tax analysis Intercompany agreements Systems & allocation models VAT/GST/ Customs Financial and tax reporting Compliance testing and audit defense, local financial statements IT Data extract Ledger / journal postings Invoicing & settlement Slide 11

12 TP execution a people function TP centers of excellence Slide 12

13 TP execution a people function Implementing a TP CoE Effective TP CoE implementation generally requires: Clear definition of roles and responsibilities, including incentives Detailed operational framework: Training Monitoring and evaluation Key Strategic questions to resolve - Who owns the CoE - Pros and cons All these components are also required for effective TP implementation in a non-coe environment. Slide 13

14 Typical pitfalls and challenges Slide 14

15 Common implementation errors Accounting policy - Currency - GAAP differences - Exceptional costs - Below the line items Accounting execution - Push down of charges - Forecast data - Segmentation VAT/Customs Withholding taxes Internal controls - Inconsistent data - Incomplete data - Mismatched data - Poorly defined TP targets - Lack of IT controls Slide 15

16 Typical data challenges Tangible goods flow, asset transfers, intra-group leasing, operating intangible businesses (e.g., media, software licensing) Intangibles, cost sharing, recharges/rebilling, financing Triggered by supply chain /operations Controls and processes regarding recording of entries likely to be strong(er) Usually triggered by the tax team Manual processes often Excel based analysis Challenges include: Volume of transactional information Understanding nature of supply chain and being kept informed of changes Data complexity: Are systems capable of providing SKU-level data? Interface with standard costing systems (multiple versions of the truth, and time lag issues) Challenges include: Obtaining timely and accurate data Control environment re: calculations Driving execution downstream (invoicing, settlement, journals, etc.) Interaction with other taxes e.g., withholding tax Meeting close process timetable Slide 16

17 Thank you This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it All rights reserved. refers to the network and/or one or more of its member firms, each of which is a separate legal entity. Please see for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

OECD releases discussion draft on transfer pricing documentation and

Tax Policy Bulletin Tax Insights from Transfer Pricing OECD releases discussion draft on transfer pricing documentation and country-by-country reporting 31 January, 2014 In brief Multinational enterprises