Managing a business is no easy matter nowadays. You have to comply with a diverse range of legal and regulatory requirements, often involving many different people within your organisation.
Overview and efficiency
The people responsible for the tax matters of an organisation face a host of different tax challenges. You are overloaded with information, developments continue at an increasingly faster pace and the consequences of non-compliance with tax obligations are increasingly more serious. Above all, you need to maintain an overview and a way of coping with the challenges in an efficient manner. In addition to filling in the right forms at the right time, you also want to be able to focus on optimising your tax affairs. In short, you want to have a grip on the tax process.
Tax Annual Calendar
Together with you, we develop a clear and transparent process for managing your tax affairs. This clarity is provided by creating a tax annual calendar setting out the main fiscal milestones. This tax calendar forms the guideline for regular consultation between us during which we discuss the progress being made, any problems that may have arisen as well as new developments. By efficiently scheduling the routine matters, you create time and space within your organisation for examining your tax strategy in more detail. Practice often shows that this reveals several additional opportunities for achieving tax savings.
As enterprise with foreign branches and subsidiaries, you are increasingly confronted with the requirements in the field of ‘transfer pricing’ i.e. the pricing of cross border delivery of services and goods within the group. The main purpose of local tax authorities is to determine whether the intercompany transactions are agreed on at-arm’s-length conditions, meaning at the same price level and conditions as would be agreed between unrelated parties. By reviewing the pricing of your intercompany transactions, the tax authorities try to verify whether the reported taxable results in each country are reasonable and that the contracting parties are no artificially shifting profits to a favourable country.
Significant attention in the press, but also from tax authorities
During the last couple of years, large multinationals like Starbucks and Amazon received a lot of attention from the media about the tax structures that they implemented to optimise their tax position. Although these companies operate within the boundaries of the relevant tax laws, not everyone finds the outcome for the local treasury reasonable. In order to increase the tax revenue from the multinational companies, the transfer pricing rules are getting increasingly complex and detailed. For companies that operate internationally it is important, therefore, to verify whether the transfer pricing documentation and substantiation meets all requirements. It is just a matter of time that each taxpayer will be questioned by local tax authorities about the transfer prices that they apply. The question is not “if’ but rather ‘when’.
Specific situations deserve special attention
In addition to ordinary business activities and transactions, we experience that local tax authorities are eager to assess the at-arm’s-length nature of the following transactions:
Continuous losses trigger questions
From experience we know that a discussion with tax authorities about the intercompany pricing policy (“transfer pricing”) can start if the business activities are consistently loss making (“would an independent company also continue to absorb these losses or simply terminated these activities?”) or strong shifts in business results (“do strong fluctuations in results match with the nature of the business activities and the risk profile of the company?”)
Your answer ready in your desk drawer
Given the importance (and attention from the tax authorities during a tax audit), most companies that operate internationally decide, therefore, to substantiate their transfer-pricing model. Since providing evidence about the business like character (‘the at-arm’s-length nature’), is not an exact science, many of our clients also use an independent third party transfer-pricing database to benchmark the transfer prices applied with the outside world. These databases contain millions of other companies that are engaged in similar business transactions. For your enterprise this is a crucial check to evaluate the risk that the risk tax authorities may challenge the applied intercompany pricing and profit margin.
From strategy to documentation
We can assist you with the preparation of your transfer pricing strategy and documentation. We have extensive experience with most countries and could for instance assist you to obtain upfront approval (a ‘tax ruling’ or ‘Advance Pricing Agreement’) from the tax authorities. Furthermore, transfer pricing can also be used to lower your global effective tax rate or to utilise your existing loss capacity more effectively.
We are always willing to discuss with you the range of our services in an informal discussion.
Attitudes are also changing within the Dutch Tax Revenue. 'Horizontal Monitoring' is in. 'Mutual trust' and 'transparency' are important key words in this concept of monitoring by the tax authorities. But be careful not to betray that trust.
With 'horizontal monitoring', the tax authorities examine your internal organisation and processes as well as how they are controlled. Is the company 'in control' of the business processes that are relevant to tax matters?
How will you respond to this trend? Fisconti can help you identify the advantages and disadvantages of horizontal monitoring, and together we can examine whether this form of monitoring by the tax authorities is suitable for you.
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