Transfer pricing works best designed alongside the commercial arrangements rather than reconstructed from them afterwards. We assist groups in designing and implementing operating models, and in setting the policy that allocates profit between entities — so that the allocation reflects the functions each entity performs, the assets it uses and the risks it assumes, and can be evidenced on that basis in the event of a tax audit.
The service covers:
- Design of the intra-group operating model — allocation of functions, assets and risks across entities, and the transactional flows that follow
- Development of group transfer pricing policy, including methodology, target margins and the mechanism for applying them in practice
- Business restructuring analysis, including identification of transferred functions or intangibles and any exit charge arising
- Modelling of tax outcomes across the relevant jurisdictions under alternative structures
- Drafting of intra-group agreements that reflect the delineated transaction rather than contradicting it
- Design of the operational process — the year-end adjustment mechanism, the responsible function, the data required — so the policy is actually implemented in the accounts
- Assessment of interaction with wider developments, including the OECD Two-Pillar framework
A policy that is not applied in practice offers no protection. Where the conduct of the parties departs from the documented policy, it is the conduct that will be examined.
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