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Transfer pricing with Van Oers

Transfer pricing & transfer pricing documentation

Companies operating in the international arena need to attribute their income and expense across different countries. These companies are then required to apply internal transfer prices, which must be determined at arm’s length.

Differences in tax rates

Every enterprise seeks to arrange its tax affairs to optimum advantage. Multinational enterprises can utilise the differences in tax rates between separate countries by transferring goods and services within the group.

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The role of transfer pricing

Transferring products and services between the constituent companies of a multinational group affects the amounts that the group pays in tax in the various countries. To ensure that these transfers are given shape in a manner that is acceptable to all the parties involved, the tax authorities apply a system that is commonly known as transfer pricing (in Dutch: verrekenprijzen). Transfer prices are used to ensure that internal transfers of goods and services are based on market prices. These transfer prices need to be determined at arm’s length.

Arrangements for transfer pricing

Companies that use internal transfers of goods or services between separate establishments in different countries can make arrangements with the tax authorities – preferably beforehand – about the consideration to be charged. These arrangements are laid down in an Advance Pricing Agreement (APA) ruling. To obtain an APA, the enterprise must submit paperwork documenting the way in which the transfer prices are determined and the basis for those prices. This enables the tax authorities to determine whether the transfer prices reflect market prices and whether all the applicable conditions are met.

Transfer pricing with Van Oers

Interest and royalties

Interest and royalties that a multinational enterprise receives and pays require the company to have ties with the country where it is established (‘substance requirements’). For example, a licensing company may apply for a ruling if that company is exposed to real risks relating to the operations there. Here, too, the arm’s length principle applies.

Transfer pricing: questions and further information

Our specialists are ready to answer any questions you may have about transfer pricing. If you wish, we can also assist you in determining competitive prices, preparing the paperwork and filing your APA request. Please complete the form shown on the right to contact Van Oers International. We will contact you within two working days.