What Does A Transfer Pricing Consultant Deliver?
Posted by Valentiam Group on February 1, 2021
You’re thinking about enlisting the help of a transfer pricing expert, but you’re still not sure what a consultant can deliver for your organization. Will they save your company tax dollars? Will they make the transfer pricing process easier to manage? Will they protect your company from incurring costly penalties? Here we’ll share some of the key benefits a transfer pricing consultant brings to an organization looking to optimize intercompany transactions and global profit allocation. We’ll also give you some tips for finding the right consultant to fit your needs.
The Value Of A Transfer Pricing Consultant
A transfer pricing consultant provides value for clients in three distinct ways: 1) ensuring compliance with transfer pricing guidelines, 2) providing guidance in planning and optimizing transfer pricing policies, and 3) assisting with dispute resolution.
Ensuring Compliance With Transfer Pricing Guidelines
When it comes to satisfying tax authorities, companies face a big compliance burden. It can be very challenging to produce transfer pricing documentation that is both contemporaneous and compliant with filing requirements. Penalties can be assessed if a taxpayer’s transfer pricing documentation doesn’t adhere to local tax regulations and the OECD guidelines.
Taxpayers have to decide whether they need to take any reserves for uncertain tax positions on their financial statements—which can be hard to determine without extensive experience in transfer pricing. That’s when a transfer pricing specialist can be of great value. Because they understand the industry and transfer pricing risks like no one else, they can provide penalty protection and decrease the risk of an audit or dispute by tax authorities.
Planning & Optimizing Transfer Pricing Policies
Companies often engage transfer pricing consultants when something in their business changes, such as:
- The supply chain is altered
- A new product is developed
- New intellectual property is created/acquired
- The business is restructured
- An acquisition or divestiture occurs
A consultant ensures taxpayers make smart decisions regarding transfer pricing in the midst of these changes to ensure a positive outcome. Careful and appropriate transfer pricing planning in these scenarios can result in optimal financial performance; in contrast, a lack of planning can lead to a poor outcome for the business.
Transfer pricing consultants have significant experience with different industries and transactions. A consultant brings a broad set of knowledge and skills to the table, and can help clients find creative ways to achieve their ideal outcomes.
For example, if a large organization acquires a smaller company from a completely different industry, the parent company’s employees may lack industry expertise. A transfer pricing consultant can offer an objective, knowledgeable perspective and can help manage the planning process to maximize profits and minimize risk throughout the acquisition. (Tweet this!)
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A transfer pricing consultant is also especially valuable in situations where tax authorities audit or evaluate a company’s tax policies and documentation. This process is comparable to bringing a lawyer to court—you must have the right representation when your transfer pricing is being challenged.
From a strategic perspective, it’s beneficial to engage a consultant from the start. Why? Because a transfer pricing consultant knows how to best respond to requests for information, and how to present a business in the right way to achieve an ideal outcome. You’re less likely to achieve a favorable resolution if tax authorities haven’t accepted your position early on in the process. Involving experts from the beginning—before the tax authority begins gathering information—is critical for establishing trust and influence.
Once a tax authority has established a counter position, it becomes a true controversy—and that’s when you absolutely need representation. From the appeals process to litigation, there are many complicated and potentially costly steps in the process that are difficult for companies to manage without help.
How To Choose A Transfer Pricing Consultant
After you’ve determined that you need the services of a transfer pricing consultant, how do you decide who to hire? Which consultant or firm will be the best fit for your needs and goals? There are a number of important factors to consider:
Experience: Consider the consultant’s credentials and background. Ideally, you want a transfer pricing consultant with a broad range of experience—especially experience in your industry. You should look for someone who also has a wide range of experience in various transfer pricing scenarios, and whose approach aligns with your goals for your transfer pricing strategy.
Find out who’s on the team, and in particular, who you’ll be working with. Will you be working with the most experienced members of the team, or less experienced associates? Valentiam clients work directly with our partners on a daily basis. With bigger firms, you usually won’t be working with the most experienced people in the firm.
- Rate structure: Be sure to ask questions about the rate structure so you know it will work within your budget. Even the most experienced transfer pricing consultant won’t be able to help you if you can’t afford their services.
- Pragmatism: Practicality is a somewhat subjective measure, but one that’s important for the relationship to be successful. Are they going to design a plan or give you advice that you can’t realistically put into practice? Are they going to give thought to your specific circumstances and needs, or offer you an off-the-shelf solution? If your goal is to optimize your transfer pricing strategy, you are going to need a custom plan tailored to your unique situation—not a cookie-cutter solution.
- Prior success rate: Not only should your consultant have experience in your industry, but they should also have had success in dealing with situations similar to yours. When interviewing consultants, ask about their experience in handling those scenarios. Also ask about their experience and success rate in handling audits and defending against challenges raised by tax authorities.
Choosing a consultant with these attributes means the difference between simply managing transfer pricing compliance and having a defensible transfer pricing strategy designed to maximize profits. As helpful as it is just to have someone making sure that you’re in compliance with OECD guidelines, you’ll get much greater benefit if you hire a consultant who checks the boxes on all of the factors above. Using these guidelines to select a consultant will help ensure that you partner with someone who understands your situation and can steer you in the right direction.
We’ll help you navigate transfer pricing.
Transfer pricing can be complex and confusing, but it doesn’t have to be that way.
Valentiam’s world-class transfer pricing specialists deliver innovative, thoughtful, and 100%-supportable strategies you can actually implement. It’s our goal to design economically-sound strategies that your company can also easily administer. With the help of one of our seasoned experts, you can maximize company profits and minimize audit risk. Let’s talk about your unique transfer pricing challenges and how Valentiam can help solve them—schedule a free discovery call today.
Topics: Transfer pricing
There are no guarantees for avoiding transfer pricing audits, but taking these steps will reduce your risk—and ensure you’re prepared if you are audited.