International businesses have to make sure all related party dealings are arranged at arm’s length.
Transfer Pricing is a major topic for international businesses.
Tax Transparency as asked for by a majority of countries is to be met by master-file and local-file documentation reports as well as by Country-by-Country Reporting (CbCR) disclosing key figures and information of the groups.
Ultimate allocation of taxable profits is with the creation of value, and hence diligent value chain analyses (VCA) are key to develop, manage and defend a company’s global profit attribution and tax set-up.
Only the translation of company’s business models into a sound transfer pricing policy allows for sustainable management and defense of the tax and transfer pricing set-up from day-to-day application to annual documentation.
Arm’s length conditions are in most cases ranges of discretion. What means companies must understand what the arm’s length standards are to assess and manage any thereto related risks.