We have the luxury of reading a lot of Transfer Pricing reports, including master files and local files for BEPS compliance. We’re usually reading them with a specific purpose: to understand the structure of the intercompany supplies, and translate that structure into appropriate legal agreements. However, we also get to appreciate the reports as they are: the good, the bad and the ugly.
Here is a very personal view of top 5 pet hates when it comes to Transfer Pricing reports:
1. Too much repetition: Some TP reports seem to be written three times over. It wastes a lot of time for the reader, and surely it’s not good for the writer either – it increases the risk of error and ambiguity, if the same issues are described in slightly different ways.
2. Not enough pictures: yes, we are elite international corporate lawyers, but we’re also human. Pictures and diagrams really help to bring the underlying business to life, and communicate what makes it tick. And that’s surely what a TP report is all about, especially a master file.
3. Lack of a summary table of intercompany supplies / charges: again, this surely goes to the heart of what a TP report is about. But it’s not at all uncommon to find reports which lack a clear summary of which legal entities are making which types of supply to which recipient legal entities, and which pricing methodology has been applied
4. Lack of allocation keys for apportionment of costs between multiple recipients.
5. Poor consideration of corporate benefit issues for individual legal entities or groups of legal entities which participate in a given intercompany supply. This goes to the heart of corporate governance / subsidiary governance, and whether a purported arrangement is actually sustainable in reality.
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