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.
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.
Planning an acquisition to grow your business? Talk to us as part of your acquisition planning strategy.
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.
We’ll Help You Navigate Transfer Pricing
Transfer pricing can be complex and confusing, but it doesn’t have to be that way. 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.