Transfer Pricing
Legal documentation services for transfer pricing professionals.
By putting in place the right legal documents to back up your transfer pricing policies, we can help you:
- reduce the likelihood of challenges by tax authorities
- increase your ability to deal with any challenges or investigations quickly and effectively
- reduce personal liability risks for directors and senior accounting officers
- save money by taking cost effective action now, rather than expensive last minute damage limitation
In many multinational groups, the legal documentation of intra-group agreements is haphazard at best. There may be a lack of coherent legal policies or templates which are tailored to the group’s needs and kept up to date. For in-house tax professionals, the process of educating internal or external lawyers in what is important from a tax perspective may seem an unwelcome demand on their time.
To add to the complexity, many groups are run by reference to lines of business rather than the legal entities involved. This can lead to a lack of scrutiny by directors in considering what support each individual company can actually count on from its sister companies in order to be able to continue in business.
Often these issues only come to light when the arrangements are challenged by tax authorities, in which case the cost of taking effective action is greatly increased.
The opportunity
In house transfer pricing professionals have a unique opportunity to create clarity in this area. By ensuring that appropriate legal documentation is in place, they can make a significant contribution to managing the group’s overall tax position by minimising the likelihood and impact of a challenge by tax authorities.
Some common triggers for documenting intra-group legal arrangements:
- as part of the implementation of a new global transfer pricing policy
- tax planning opportunities involving intellectual property
- in preparation for anticipated investigation by local tax authorities
- as part of the integration of a new business following an acquisition
- in connection with the restructuring of a group and the creation of new economic risk-taking entities
- in connection with legal entity reduction programmes to reduce compliance and reporting costs
- changes in economic conditions, which mean that previous pricing models no longer work
How we can help
McGrigors is experienced in project-managing the international implementation of transfer pricing arrangements from a legal perspective. The costs involved can be far outweighed by the value of increased ability to withstand tax challenges, as well as the governance benefits of having clear relationships between related entities. We use our international legal network to work as an integrated team with the in-house tax and legal functions and external tax advisers and economists.
Here are some of the ways in which we typically add value:
- early-stage legal feasibility input into proposed structures and arrangements
- legal due diligence reviews to assess existing arrangements, including ownership of key intellectual property rights and implied contract terms
- preparing legal documents which support the transfer pricing strategy
- project managing the implementation of new structures or arrangements, including virtual secondments to deal with questions and objections raised by local entities
- periodic reviews of existing arrangements, often on a sampling basis, to assess ongoing compliance
Transfer Pricing - What you need to know
For more information please contact: Paul Sutton