Transfer pricing policy
The transfer pricing policy is the adopted principles for determining transfer prices in transactions with related parties, the principles for preparing transfer price documentation and the principles for identifying the obligation and making possible transfer price adjustments, in accordance with tax regulations.
The main purpose of implementing a transfer policy is to establish the principles of price calculations for the standard and most significant high-value transactions within a capital group. This includes identifying related parties, recognizing transactions and creating transfer price documentation for transactions involving related parties.
The transfer pricing policy is usually drafted for transactions that constitute the core business of the group, establishing the main terms of settlement between entities in the group. In certain cases, a transfer pricing policy is also drawn up for transactions that are deemed sensitive as they can be an effective tool for the transfer of income among entities in a capital group, and therefore, are often of particular interest to the tax authorities.
Purpose of introducing a transfer pricing policy
At SWGK, we recognize the paramount importance of adopting a sound approach to ongoing related party transactions for the business.
The transfer pricing policy is a key tool for controlling transfer pricing risks.
The main purpose of preparing and introducing a transfer pricing policy is to ensure:
Compliance of the price calculation methodology with the arm's length principle
Transparency in price calculation rules
Consistency in transactions terms and conditions
Identification of transactions
Our services are designed to provide comprehensive support at every stage of related party transactions, starting with the preparation of the transfer pricing policy to the preparation of local and group transfer pricing documentation, up to the preparation of the TPR return.
Benefits of implementing a transfer pricing policy
The preparation and application of a transfer pricing policy provides a number of benefits that can significantly affect the performance of transfer pricing obligations and the security surrounding the performance of related party transactions.
Ensuring that the price calculation methodology adopted for intra-group transactions is consistent with the arm's length principle.
Optimising the process of preparing transfer pricing documentation for related party transactions.
Limiting exposure to tax risks through consistent and coherent presentation of the circumstances of transactions as well as the facts (functional analysis) in the prepared documentation.
Reducing the risk of financial penalties and overvaluation if the tax authorities challenge the market nature of prices in transactions between related parties.
A transfer pricing policy is an essential element in the operation of any entity belonging to a group of related parties, especially in the context of globalised markets and increasing tax regulations. A professional approach to transfer pricing policy can improve operational and financial efficiency and contribute to maintaining competitiveness in the market.
In addition, it should be transparent and sufficiently flexible to contribute to both efficient business management, and minimising tax risks associated with related party transactions.
Learn how our expert services can help you implement effective transfer pricing strategies, minimizing risks and ensuring compliance with international tax regulations. Our tailored solutions will empower your business to conduct related-party transactions with confidence.