Transfer price: efficiency of the process should be on the tax agenda of multinationals

With the process of globalization that has been going on for some decades, companies no longer see the borders of their home countries as restricted areas for business development and have embarked on a new scenario with regard to market, fiscal and tax rules, evidencing the need to adapt to new standards of information on global operations.

Given this scenario, the concept of transfer pricing arises, a method applied in operations between parts of the same economic group, when one of them is located abroad.

Transfer Pricing goals

Each country has its own taxation rules and different tax burdens, which imposes the need for the taxpayer to adapt to the provisions envisaged in the places where it operates.

As countries' fiscal agencies extend control over these transactions as a way of raising revenue, the rules require companies to meet the requirements and avoid double-taxation (both origin and destination).

The transfer price occurs when these related companies, but located in different territories, sell or transfer goods, services or intangible property. As they are part of the same entity, these negotiations could be carried out with prices below those practiced in an open market, which would lead to distorted results for the business group.

It can be said that the purpose of these rules is the correctly allocate profit in transactions between companies within the same group, balancing the tax bases of the jurisdictions involved and eliminating possible distortions in the relationship between these companies.

It is also noted that, when there are transactions with unrelated companies, but considered as "tax haven", the transfer price should be calculated.

The transfer price can also be understood as a way to increase the transparency of business operations, also increasing the perception of the market, investors and society as to the integrity of the business.

Application and calculation of the transfer price

- The legislation related to the transfer price applies to Income Tax and Social Contribution on Net Income (CSLL).

- Imports, exports, payment and receipt of interest (contracts registered with the Central Bank) are transactions subject to the transfer price. This is controlled by the Treasury to avoid the results being made by the companies, affecting the reality of the calculation of profits.

- On December 31, the deadline for calculating the transfer price for the year is closed.

- The calculations must be demonstrated in the Tax Accounting Bookkeeping (ECF).

Methods of transfer pricing control

There are different methods of controlling the transfer price and the taxpayer must make the option by the method that results in the least tax impact. This choice should be very well evaluated, since there may be a question from the Treasury regarding the option adopted.

There are five methods for export (CAP, PVEx, PVV, PVA and PECEX) and four import methods (PIC, PRL, CPL and PCI).

Besides the need of the analysis when the company practices back to back operations.

In order to achieve the best definition, a detailed evaluation of the processes and the international operations practiced is necessary, which gains more support when performed with the support of a specialized consultancy.

Good practice

When companies plan and organize to calculate the transfer price, in a consolidated way among all the units that operate with each other, they avoid the expenditure of cash in taxes, so that they can act predicting scenarios and with a safe margin of time to perform adjustments and internal alignments with the matrix. Keeping a check only at the end of the year, for example, can be risky and has harmful consequences to the business when it comes to settling the accounts with the Treasury.

Another important point is attention to databases. Today, Brazilian oversight agencies are already tracking purchases, sales and inventories from SPED Block K crossings with transfer price information. Thus, companies must keep their bases current and uniform. Investing in software that centralizes budget and financial data and anticipating these crosses is one way to avoid inconsistent material.

Because the transfer price identifies purchases, sales and inventory, efficient cost management also makes a difference. Thus, the company also has the opportunity to identify the main sources of expenses and act for the reduction.

In this sense, a deep tax analysis allows identifying situations in which there is the possibility of tax reduction and even exemption.

It is correct to see transfer prices as a possibility of raising tax collection, since a different interpretation of the legislation can seriously impact the economy or the expense of resources with the payment of taxes.

Organizations that are implementing business overseas should be even more cautious with practice, which is a factor that brings relevant impacts to market competitiveness.

Professional support to achieve compliance

Domingues e Pinho Contadores has specialists who can assist multinational companies on the development of sustainable fiscal planning that takes into account transfer pricing policies and documentation requirements.

This service supports the client in the administration, documentation, analysis of policies and processes and option by the transfer price control method, always seeking an alignment with the business strategy.

Among the results of this action is the reduction of the impact of the adjustments made at the end of the year, the improvement of the monitoring of transfer prices and the minimization of the risks of inconsistencies that may involve the issue.

With guidance, companies are led to plan their operations to be more tax-efficient, so that the reorganization of the flow of transactions is reversed in the conformity of their actions and in tax savings.