Transfer Pricing
 
We have the knowledge and experience of worldwide transfer pricing requirements. We provide a wide range of transfer pricing services to cover activities in the US, Europe and other places around the globe.
 
We advise regarding country and international “need” for transfer pricing, “preparation” of legal documentation, tax planning and tax optimization.     
 
We serve various international clients including trading companies, manufacturing, software, services, startups and more.
We work together with our clients in order to achieve the most effective services package from both quality and cost wise.
 
Our services include:
 
Transfer pricing study
 
Transfer Pricing rules require the application of the "arm's length principle" for the valuation of cross-border transactions between associated entities. In a global economy where multinational entities play important role, countries need to ensure that the taxable profits of all related entities of one multinational group are not artificially shifted out from one tax jurisdiction to another. The transfer pricing rules need to assure that the tax base reported to each country of operation reflects the real economic activity undertaken within the country of operation. For taxpayers, it is crucial to control the risks of double taxation that may result from a dispute between two tax jurisdictions on the determination of the arm’s length remuneration for their cross-border transactions with associated entities.
 
The rules define transfer pricing Methods including minimal requirements for comparability analysis and documentation in order to insure that real transactions are in line with the arm's length principle. 
 
Our firm provides studies in line with the transfer pricing requirements.
 
International transactions performed between associated entities relates to various transactions, the most common are marketing, logistics, distribution, R&D, manufacturing, loans, management, consulting fees, and IP licensing.
 
We have the knowledge and the experience to determine the arm's length principle for each one of the mentioned services. 
 
Documentation:
 
Apart from the determination of the arm's length principle, tax payers are required to provide documents to support such determination. The documents should include as a minimum the following:
 
    Industrial analysis: overview of the industry, competition, economical factors.
 
    Functional analysis of the taxpayer, including a description of roles undertaken, risks assumed and assets owned by each party to the transaction.
 
    Transfer pricing methods: comparable uncontrolled methods, resale price methods, cost plus method, comparable profit methods, profit split method and else
 
    Implementation and results.
 
Methodology
 
According to transfer pricing rules, several pricing methods are acceptable.  
 
Most rules define hierarchy and best method rules in order to select the method that, given the facts and circumstances, is higher in hierarchy and that provides the most reliable measure of an arm’s length result. The main factors to be considered are the level of comparability between related and unrelated transactions and the quality level of the data used.
 
The main and common methods are as follows:  

Comparable Uncontrolled Price Method (“CUP”)


The comparable uncontrolled price method compares prices charged in related party transactions with transactions between non related parties. This method is generally the most reliable measure for arm’s length results, if the transactions are identical or similar in most aspects.
 
 
Resale Price Method (RPM)


The application of this method does not require the comparison of identical or very similar transactions between uncontrolled parties.
This method focuses on similarity of functions performed and similarity of the circumstances in which the resale occurs and the risks that are taken.
 
Cost Plus Method 


The cost plus method compares the profit above cost in related and non –related party transactions. This method is usually used where goods are manufactured or services are handled and then sold or provided within the group.
 
Profit Split Method 


The profit split method allocates operating profits or losses from controlled transactions in proportion to the relative contributions made by each party in creating the combined profits or losses. Relative contributions must be determined in a manner that reflects the functions performed, risks assumed, resources employed, and costs incurred by each party to the controlled transaction.
 
Comparable Profits Method (CPM)
 
This method generally compares the results of the tested party in a related transaction to the results of companies that perform similar functions. Due to the fact that this method measures the total return on business activities, the related and the non-related parties need to be less similar compared to the cost plus or resale price methods.
 
Using the process to tax planning
  
The process of transfer pricing usually enable us to;
 
    Define and understand the client’s legal structure.
 
    Analyze and understand the legal environment as well as the tax. environments of country/countries of operation.
 
    Analyze and understand the client’s business activities.
 
    Map the relevant intra-group transactions.
 
    Identify tax “problems” and ‘exposures”.
 
We could use the above in order to advice regarding the tax planning and optimization possibilities.