Transfer Pricing

Talanton supports companies and tax specialists on transfer pricing. Transfer Pricing involves the establishment of market-based transfer prices that are used for mutual deliveries of goods and services within a multinational company. Companies want their fees in the countries in which the tax returns are highest and where the rates are lowest. In contrast to tax authorities, who want to prevent the artificial shifting of profits through their respective tax bases.

The rules on transfer pricing are significantly changed as of April 1, 2001 (acts of March 30, 2001, No. 2001/295M Ministry's Publication). The so-called ruling practice is replaced by an Advance Pricing Agreement ("APA"). An APA is an advance agreement on the establishment of a reward or a business method for determining a reward for such cross-border transactions between affiliated entities or between parts of the same body. An important feature of the APA is that customization is included with each individual APA. As of January 1, 2002, the rules on transfer pricing are also embedded in the law. In particular Articles 8b and c of the Corporation Tax Act 1969 are of interest. An addition to the transfer pricing decision is made on August 21, 2004 (No. IFZ2004/680M) to make the legislation more into line with the guidelines of the Organisation for Economic Co-operation and Development (OECD).

In the corporation tax law, the at-arm's length principle is introduced and the requirements for documentation are inserted. The taxpayer is considered, preferably prior to the transaction documentation, to establish how the transfer price is fixed. Moreover, sufficient information has to be provided so that the tax authorities can evaluate the transfer price based on trade terms on which independent parties would have agreed.

Regarding flow activities, which consist of receiving and paying interest and / or intra-group royalties, requirements are formulated with regard to the bond that the body has with the Netherlands, these are the so-called "substance requirements. For example, a business license can only be an APA request if the company is exposed to real (commercial and financial) risks related to activities to be undertaken and can demonstrate that its contracts with affiliates at-arm's length are.

In the context of Transfer Pricing Talanton can act as advisor to the company or the tax on:

• Identifying risks;
• Quantify risks;
• Determining the expected losses;
• Determining Minimum Capital Risk;
• Determining the required return on equity;
• Determining at-arm's length fee, based financial-economic analysis of:
• Licensing / royalties;
• Coupon (spread) on loans;
• Reporting the information required by the tax authorities:
• The operation conditions and relevant characteristics;
• Description of the company and its activities;
• Functional analysis;
• Description of the Transfer Pricing method and the derived transfer price.