What is the outsourcing and offshoring of transfer pricing?

As in the general definitions, outsourcing of transfer pricing work refers to an organization contracting work out to a third party, while offshoring refers to getting work done in a different country, usually to leverage cost advantages.

When transfer pricing outsourcing is combined with transfer pricing offshoring, not only is work contracted out to a third party, but it is also agreed that the work will be performed in a different country. The reasons are usually to take advantage of the benefits of outsourcing and offshoring both.

Both offshoring and outsourcing has become increasingly popular over the last period as they have provided a way for companies to find international specialists at a considerable discount.

When we can help?

You need a cost-efficient transfer pricing solution
You need a single point of contact for all your transfer pricing issues in EU
You need transfer pricing methodologies that are acceptable in all EU countries
You don`t have detailed transfer pricing practical knowledge

It is commonly known that transfer pricing is at some point more of an “art rather than a science”. This statement is made because there are situations when a simple transfer pricing problem can have various solutions that are equally correct.

Therefore, there is no quick and safe way to educate yourself on how to meet all the transfer pricing requirements that tax authorities have.

Not having enough relevant knowledge with transfer pricing and not being able to anticipate and comply with all tax authorities expectations or doing it incorrectly can lead to unnecessary transfer pricing penalties.

Our transfer pricing professionals have a vast expertise in dealing with tax authorities that you can complement with and leverage in your transfer pricing affairs.

You don’t have a transfer pricing file prepared, although you should

Related parties from all countries in the European Union must prepare and present a transfer pricing documentation either contemporaneous (especially in case of large taxpayers or large groups) or upon the request of tax authorities.

The penalties for non-compliance with documentation and reporting requirements in some European Union member states are harsh, but in every case, the penalties can be avoided if proper documentation is prepared and the transfer prices are proved to be at arm’s length.

You must or want to update your existing transfer pricing file

In some situations, existing transfer pricing files must be updated on an annual basis as per the local regulations or they are updated willingly by taxpayers in every two or three years in order to assess their transfer pricing risks.

We have expertise in updating transfer pricing files, among the activities that we regularly undertake in outsourcing and / or offshoring projects:

  • the update of the facts presented in the original functional analysis;
  • the integration of any significant business changes that could affect the profit potential of the firm, the organizational structure of the relevant legal entities, markets for the company’s goods or services;
  • the update of the industry analysis with trends to the current year;
  • the analysis on any new transactions;
  • the confirmation of the method selected in the previous study for recurring transactions;
  • the update of the economic analysis to incorporate the most recent available data relevant to the methodology applied.
You don`t have access to a database

Benchmarking is of paramount importance to any transfer pricing analysis as economic references are critical to justify the income allocation within a group or for a specific intercompany transaction.

Almost any type of benchmarking study requires a paid subscription to database providers which can be in some situations too burdensome to be borne by a single group of companies.

If you don’t have access to the database to complete the benchmarking (also known as economic analysis) but you have knowledge of transfer pricing, you can outsource and / or offshore the preparation of the benchmarking studies to us.

We are proud of our ability to carry out customized benchmarking studies for all types of transactions that a company can carry out at a quality level that truly helps minimize transfer pricing risks.

You are not sure which transfer pricing method to use

The OECD Transfer Pricing Guidelines specifies five methods to evaluate the pricing of related party transactions. Most countries generally endorse the methods in the OECD Transfer Pricing Guidelines in their own transfer pricing regulations.

The OECD Transfer Pricing Guidelines require an inquiry into the availability and the reliability of data, the degree of comparability between the controlled and uncontrolled transactions and the sensitivity of the assumptions to data deficiencies in order to determine which method should be used for the particular transaction (or group of transactions) under review.

Due to such complexity in choosing an adequate transfer pricing method, the risk of choosing the wrong method is relatively high.

If the wrong method is used, your entire work from then on, may be incorrect or inconsistent with the requirements of the transfer pricing legislation and therefore your documentation will not be sufficient for supporting its purpose.

We can support you in selection of the method for each type of transaction you have to analyse.

How we can help?

Among the types of activities that we can help you with in situations you outsource and / or offshore your transfer pricing activities with us:

  • preparation of transfer pricing files;
  • preparation of tailored benchmarking studies;
  • preparation of transfer pricing policies;
  • support during transfer pricing audits;
  • preparation of Country by Country Reports and submission of these reports;
  • preparation of Country by Country Report notifications and submission of these notifications;
  • management of transfer pricing documentation projects;
  • creation of procedures to be applied by each company when performing an intra-group transaction;
  • coordination with foreign group companies and external transfer pricing advisers;

Below, we listed a number of situations in which you can better understand when our outsourcing and / or offshoring offer is adequate for your needs.

Key benefits

Maintain consistency in technical approaches across all the group entities

The rise of transfer pricing controversy and its increased complexity reflects tax authorities’ increased sophistication and resources in this area.

Moreover, intensification in the exchange of information led to conducting joint transfer pricing audits by two or more tax authorities.

Having regard the above, it becomes more and more important that groups of companies should have a transfer pricing strategy and moreover that they should align their technical approaches of documenting the intra-group transactions.

By offshoring and outsourcing your transfer pricing function to us, not only you won’t need to think to all these issues, but you will also have by default a strategy and aligned technical approaches across all the entities we manage.

Have one point of contact for all your transfer pricing affairs

You can of course contract us for managing your transfer pricing affairs for only one entity, but you should keep in mind that we can also manage all the EU entities from a transfer pricing perspectives and you could achieve maximum of efficiency by doing so.

We can act as a liaison across all you entities and keeping their business under control from a transfer pricing perspective and then we will report directly to the persons assigned from your side.

Support in times of increased workload or shortage of personnel

As transfer pricing experts, we offer offsite and onsite internal services in any transfer pricing matter. You will get flexible expert service without having to recruit a full-time employee.

We will constantly have a perfect understanding of your situation and in times of increased workload, we can support you and / or supplement the already existing resources.

Highly specialized and cost effective

We offer a new and highly effective solution to your transfer pricing affairs in these times of scarce internal resources and increasing cost-pressures.

We have experienced and competent transfer pricing consultants that can truly handle your transfer pricing issues on a regular basis relieving you from these issues and allowing you to concentrate on other essential tasks.