Questro International is a specialist firm which provides a full range of transfer pricing solutions across the entire Transfer Pricing Lifecycle for a broad spectrum of transfer pricing projects. We combine classical transfer pricing advisory work with innovative IT solutions to create value and efficiencies for our clients.
All of our Solutions are implemented with a clear Transfer Pricing Lifecycle perspective. The TP Lifecycle characterises where a project fits along a timeline from initial design work, through documentation and control efforts, to the inevitable interaction with tax authorities via upfront agreements, or subsequent enquiry management and conflict resolution.
Questro International is able to offer clients both individual and multi-phase projects across the entire TP Lifecycle. We believe in long-term client relationships and, for us, this means establishing projects that are both cost effective and flexible over a multi-year TP Lifecycle.
During the Design Phase, Questro helps clients to:
During the Document Phase, Questro helps clients to:
During the Control Phase, Questro helps clients to:
During the Defend Phase, Questro helps clients to:
We are often asked by clients what elements are required to make a great TP framework? Whilst the answer will always depend on the underlying fact pattern of the client, their overall tax policy and appetite for risk, the following points should be considered:
One of our core competences is the design of transfer pricing systems. A well-designed transfer pricing system is based on a clear fact pattern (i.e. functional analysis per group company or per intercompany transaction). You must then select the appropriate transfer pricing methods for price setting and testing purposes within the context of the business model and responsibilities of each group company.
Documentation is essential to setting out the logic behind your TP system and demonstrating compliance with the arm's length standard, but should be prepared "strategically" on a country-specific, per region or group-wide basis. "Master" or "Core" reports can be very useful to address transfer pricing documentation in a cost-efficient manner where: operating companies have a high degree of common functionality; documentation requirements are OECD compliant; and reasonable deadlines for submitting local documentation apply.
In the recent years, there has been an increased interest in Tax and Transfer Pricing Control Frameworks among Tax Administrations and Corporates. Rather than testing individual transactions and journal entries on a random basis, Tax Administrations in many countries are increasingly basing their audit selection on risk assessments. If a Corporate can demonstrate that it applies a well-designed arm’s length transfer pricing policy in combination with business processes to address transfer pricing issues on an on-going basis, it is less likely to be exposed to a transfer pricing audit.
Pricing of intercompany transactions is not a one-off, static exercise. The pricing of transactions needs to be evaluated on a regular basis depending on factors such as production costs, turnover, operating expenses, market share, benchmarking results and consolidated operating margin in the group. Price adjustments are often performed as year-end adjustments or quarterly adjustments. In addition to TP analysis, customs and VAT issues should also be considered when determining a price adjustment policy. Compensating adjustments, i.e. an adjustment to the taxable income to rectify a non-arm’s length position can also be considered.
We believe some element of coaching or training of in-house TP and tax teams is essential for the successful longer term operation of a TP system. For some Questro clients this is limited to a few workshops and the provision of internal training materials. For others, who prefer more active management of their transfer pricing work in-house, we offer a coaching model where you can consult us on highly technical or specific issues.
It is always a good idea to summarise your TP system in a clear TP Policy Document. In addition, TP Operating Guidelines can provide clarity for non-tax personnel within your business. Increasingly, both TP Policy Documents and Operational Guidelines are referenced within a Corporate's overall Tax Policy Document and/or Tax Control Framework.