However, Transfer Pricing is not only an issue in international situations. Under Dutch law, companies are also under a statutory obligation to document transactions between divisions conducted within the same country. While the associated risks in a purely domestic situation may seem more limited than those faced in international situations – particularly when one of the group companies has a tax loss – they are still enough to attract the attention of the national tax administration. Without the availability of Transfer Pricing documentation, you too would be at a disadvantage should the tax man pay a visit.
The services provided by Baker Tilly Berk
Baker Tilly Berk supports you in identifying the tax risks in your Transfer Pricing system, in minimising these risks and in spotting opportunities. This can be achieved in several ways:
• Optimisation of your business model for tax purposes
• Guidance of your organisation with respect to its legal obligations
• Guidance in concluding Advanced Pricing Agreements
• Support in discussions with the Dutch Tax Administration
Optimisation of your business model for tax purposes
As a group that operates internationally, you pay a different rate of tax in each country where you do business. The differences between these rates can be considerable. Consequently, where different portions of your group’s profits are taxed can make a real difference to the bottom line at group level. It is therefore important to be certain about the attribution of income on activities conducted in a specific country. By critically examining the underlying transactions between the various group companies as well as the spread of risks contractually associated with those transactions, it is often possible to gain a realistic tax advantage.
Guidance of your organisation with respect to its legal obligations
The more international the scope of your organisation’s operations, the greater the number of countries in which transactions will be conducted within your group. As a consequence, your organisation will have tax obligations to meet in ever more countries. Given that many countries have specific requirements that your Transfer Pricing documentation must satisfy, it is vital that you are well informed of them in order to minimise the potential risks.
Guidance in concluding Advanced Pricing Agreements
As an entrepreneur, you want to limit your risks as much as possible within reason. With regard to Transfer Pricing, for your Dutch tax obligations this may be realized by concluding advanced agreements with one or more tax authorities on the Transfer Pricing methodology to be used by your organisation. Known as Advance Pricing Agreements (APAs), these advance agreements mean you can be certain you will not have any explaining to do later on regarding your organisation’s internal pricing, provided you carry out the APA correctly and there have been no changes to the present situation.
Support in discussions with Tax Authorities
Should your internal pricing nevertheless become the subject of a disagreement with a tax authority, it is essential that you respond to the tax authority’s questions and/or comments correctly from the outset. This is because an incorrect or inadequate response can seriously affect the course of the disagreement and, consequently, its outcome. A disagreement on Transfer Pricing therefore requires a structured approach.
One of the last resources that can be applied in this respect should you be facing possible double taxation is the conclusion of a Mutual Agreement Procedure (MAP) with the tax authorities concerned. Although a MAP is no guarantee that double taxation will be avoided (the tax authorities are under no obligation to agree with one another), a MAP does provide clarity on how the various tax authorities will exercise their taxation powers.
Within the European Union, an appeal to the Arbitration Convention (under which the tax authorities are obligated to resolve disputes involving double taxation) would probably have greater chances of success.
In any event, in both procedures you are dependent on decisions made between tax authorities on which you have little influence, if any.
Why Baker Tilly Berk?
As a consultant to Small and Middle Market Enterprises, treated as corporate, Baker Tilly Berk is familiar with the operations of a wide spectrum of companies and is consequently ideally able to practically and efficiently identify the various business processes you rely on for your profits. In addition, the Baker International network offers excellent opportunities for you to have your Transfer Pricing documentation in different tax jurisdictions drawn up and/or assessed in a coordinated manner.