Depending on the area in which it falls and the significance thresholds, the companies that carry out transactions with affiliated parties and fall into the category of large taxpayers usually have the obligation to prepare and submit the transfer pricing documentation. To aid in this feat, multinational companies should take into consideration acquiring or a transfer pricing template documentation in order to document intra-group transactions more easily.
Depending on the area in which it falls and the significance thresholds, the companies that carry out transactions with affiliated parties and fall into the category of large taxpayers usually have the obligation to prepare and submit the transfer pricing documentation.
To aid in this feat, multinational companies should take into consideration acquiring or a transfer pricing template documentation in order to document intra-group transactions more easily.
- Transfer pricing template – main advantage
Since usually the period of time granted by the tax authorities for the taxpayer to prepare and provide the transfer pricing documentation is very short, a transfer pricing template would be the solution to condense the documentation effort.
Bear in mind that, in general, depending on the number of fiscal years for which the file is to be prepared, the number of transactions to be documented and the existence of group-level documentation that could be used as a starting point for documentation, the preparation of a transfer pricing file, without a transfer pricing template, may take between and 4 months.
- What should the transfer pricing template documentation contain?
Like the transfer pricing file, each transfer pricing template should contain three main sections to act as a starting point:
- Descriptive section that includes financial information, main clients, business strategy competition, legal structure of both the group and the analyzed taxpayer;
This can be drafted once in the transfer pricing template and updated when such changes occur for the taxpayer and its group of companies.
- Elaboration of the functional analysis which defines the functions performed by the taxpayer, the risks assumed and the assets used in its activity;
The transfer pricing template can include a general analysis of the analyzed taxpayer, which is assumed to last multiple financial periods, but the detailed analysis should be added every time the transfer pricing file is drafted, as each transaction might present different scenarios.
- Economic analysis – in this stage the most appropriate pricing methods are selected according to the specifics of each transaction and the application of the method to test compliance with the principle of market value and comparability studies.
In order to avoid the negative impact of the adjustments, we recommend to the medium and large taxpayers to prepare the transfer pricing file in advance, even if they are not currently under the risk of a fiscal inspection. By the help of a transfer pricing template, the advance preparation of the transfer pricing file is easy and very much to the advantage of the entity.
