Accountants and / or financial managers who have already been through the process of preparing the transfer pricing documentation know that it is not enough to subcontract this project to a specialized transfer pricing consultant and that they must also make significant efforts to provide information which in the end has to be processed and presented within the transfer pricing documentation by the consultant.
Since there has been an exponential increase in the number of transfer pricing audits performed by the Tax Authorities worldwide, there are many situations where accountants and / or financial managers do not know exactly what to expect when starting to work with a transfer pricing consultant for the preparation of the transfer pricing documentation.
Therefore, below are summarized the main aspects that should be considered by an accountant and / or financial manager, but also by the company’s management when embarking on a project to prepare the transfer pricing documentation.
The activities that fall within the responsibilities of the transfer pricing consultant
To begin with, it must be emphasized that the activities that can fall within the duties of a transfer pricing consultant are limited in real life only to the processing of the information that has to be supplied by the accounting and / or finance department of the company due to a number of reasons, among which:
(i) the business software systems that are in most of the cases customized at the level of each company;
(ii) some of the information are presented within the business software systems in a specific manner which makes these information impossible to be analysed by a different person than the one that introduced it within the software;
(iii) the amount of time needed for an outside transfer pricing consultant to learn how to use and extract data from the custom made business software systems of the company is significantly high, while a person from the accounting and / or finance department would still have to spend time to learn and supervise the consultant to use these systems.
The information request process during a project for preparation of the transfer pricing documentation file
During the process of preparing a transfer pricing documentation file, first of all, as a general rule, the transfer pricing consultant will forward to the company a preliminary information request. The information requested in this phase should be readily available at the company level and easy to be supplied by the people from the finance and / or accounting department.
Subsequently however, depending on the complexity of the project, the transfer pricing consultant may send various information requests related, mainly to finance-accounting matters, e.g. segregation of the profit and loss account on profit centers, monetary quantification of specific past events that impacted the profit and loss account, databases of transactions undertaken, information from management accounting systems, etc.
The information requested in this phase are, unfortunately, mostly needed not in a format in which they are already available but in a format that requires processing by a person from the accounting and / or finance department. This processing may sometimes require a large amount of time (even over 60-70 hours in some situations) during which there is a close communication between the transfer pricing consultant and the responsible person from the accounting and / or finance department of the company.
In conclusion, the contribution of accounting and / or finance department to the preparation of the transfer pricing file is not only significant in terms of time allocated to provide information but also has a particular importance given that the preparation of the transfer pricing documentation file is based on such primary data.
Moreover, it is important to note that when embarking on a project to prepare a transfer pricing documentation file it is recommended to have a proper budget of time that will most likely have to be spent for extraction and supply of primary raw data by a person or more from the accounting and / or finance department of the company.