Optimised Transfer Pricing Compliance: UNs End-to-End Toolkit
Click here to download the unedited Toolkit
The Transfer Pricing Compliance Assurance – An End-to-End Toolkit developed by the United Nations Subcommittee on Transfer Pricing is a comprehensive guide designed to support tax administrations, particularly in developing countries, in ensuring efficient and effective transfer pricing compliance. This toolkit is crucial for multinational enterprises (MNEs) to understand and implement proper transfer pricing practices to avoid disputes and ensure compliance with international standards.
Importance of the Toolkit
The toolkit is vital for several reasons:
- Guidance for Developing Countries: It provides tailored guidance and examples for developing countries, helping them overcome resource and capacity constraints in transfer pricing compliance.
- Holistic Compliance Assurance: It offers an end-to-end process for transfer pricing compliance, from risk assessment to audits, ensuring a systematic review of the tax environment.
- Encouraging Voluntary Compliance: Setting clear expectations and providing self-assessment tools encourages taxpayers to comply voluntarily, reducing the need for resource-intensive audits.
Objectives of the Toolkit
The toolkit aims to:
- Provide detailed guidance and examples for developing country tax administrations.
- Offer roadmaps for transfer pricing risk assessments and audits.
- Encourage alignment and exchange of good practices in transfer pricing risk assessment and audit.
End-to-End Transfer Pricing Compliance Assurance Process
The toolkit outlines a comprehensive process for transfer pricing compliance assurance, including:
- Risk Assessment: Identifying and assessing transfer pricing risks at both the population and individual taxpayer levels.
- Audits: Conducting thorough transfer pricing audits to ensure compliance and address any identified risks.
- Continuous Improvement: Incorporating feedback loops to validate and improve the compliance assurance program continuously.
Detailed Roadmap for Transfer Pricing Risk Assessment
The toolkit provides a detailed roadmap for transfer pricing risk assessment, including:
- Organizational Matters: Deciding between centralized or decentralized approaches, global vs. industry-specific assessments, and classifying taxpayers based on turnover.
- Sources of Information: We will utilize various sources, such as tax returns, transfer pricing documentation, financial statements, and publicly available information.
- Detailed Risk Assessment: Conducting a preliminary analysis, executing a detailed analysis, and determining the outcome based on the identified risks.
Detailed Roadmap for Transfer Pricing Audits
The toolkit also offers a roadmap for conducting transfer pricing audits, including:
- Preliminary Phase: Setting up an audit team, reviewing prior audit work, and establishing an examination plan.
- Execution Phase: Gathering information, conducting functional analyses, reviewing intercompany agreements, and interviewing key staff.
- Audit Closing: Summarizing audit operations, presenting findings, and making final adjustments.
Value of Transfer Pricing Expertise
Transfer pricing expertise is invaluable in ensuring compliance and managing risks. Experts can:
- Identify and Mitigate Risks: Experts can identify potential transfer pricing risks and implement measures to mitigate them by conducting thorough risk assessments and audits.
- Ensure Compliance: Experts help ensure that transfer pricing practices comply with international standards, reducing the likelihood of disputes and penalties.
- Optimize Resource Allocation: Experts can optimize the use of limited resources by focusing on high-risk areas, ensuring efficient and effective compliance assurance.
Preventative Measures for Better Management
Implementing a proper tax risk management process and establishing a tax steering committee can help avoid or better manage transfer pricing issues. According to the Tax Risk Management website, a tax steering committee can:
- Provide Strategic Direction: This ensures that tax strategies align with the overall business strategy and risk appetite.
- Enhance Communication: It fosters better communication between departments, ensuring that tax implications are considered in business decisions.
- Improve Risk Management: It helps proactively identify and manage tax risks, reducing the likelihood of disputes and penalties.
SUMAMRY
The Transfer Pricing Compliance Assurance – An End-to-End Toolkit is an essential resource for tax administrations and MNEs. It provides comprehensive guidance on ensuring transfer pricing compliance, from risk assessment to audits, and emphasizes the importance of continuous improvement. By understanding and implementing the practices outlined in the toolkit, MNEs can ensure compliance, reduce risks, and foster a sound investment climate.
