Doing business internationally? Don’t forget the transfer pricing documentation

Companies that are part of a multinational group of affiliated companies are required to maintain transfer pricing documentation. Important documentation to have in order, especially now that the Tax and Customs Administration is intensifying its supervision. Yet many entrepreneurs still overlook it. That is why Marlon Klijnhout, accon■avm tax adviser, is happy to inform you in this blog about the importance of transfer pricing and the situations in which you must be extra alert.

What is transfer pricing?

“Companies that are part of a multinational group must render account on the ‘arm’s length’ nature of their mutual arrangements and transactions. In other words, they must show that they comply with the laws and regulations and that third parties would also accept these arrangements, in equal circumstances. They can demonstrate this using legally mandatory documentation: the transfer pricing documentation.

Transfer pricing documentation

Transfer pricing documentation consists of a group file and a local file. The higher a multinational company’s earnings, the more extensive its accounting must be. Some companies are also required to include a country report in their transfer pricing records.

Consequences

Including transfer pricing documentation in the records has been mandatory since the 2016 tax year. So it is nothing new. That is why supervision is becoming increasingly strict. If transfer pricing is not done properly, you run the risk of non-deductible interest costs, double taxation and audits by the Tax and Customs Administration, which will lead to fines. It is therefore certainly worth your while to have this documentation in order.

Be extra alert

Many arrangements between entities are made verbally, in good faith. It can therefore be difficult to recognise these ‘non-arm’s length’ arrangements. All the more reason to stay on top of this. This way you will be able to avoid unpleasant situations.

Download the white paper

Want to hear some examples of situations where entities easily make ‘non-arm’s length’ arrangements? Three such examples are discussed in detail in the white paper. The white paper also tells you how to put your transfer pricing documentation in order in those situations. Finally, it also touches upon transfer pricing in times of COVID and informs you when to submit your transfer pricing documentation to the Tax and Customs Administration.

Contact us

Transfer pricing can be a complicated process. That is why my colleagues of the International Advisory Team and I are ready to help however we can. With our knowledge and experience, we are happy to assist you with advice and services. Do not hesitate to contact us. Send an email to international@acconavm.nl or make an appointment at an accon■avm branch near you.