Transfer Pricing Documentation
NERA's approach to transfer pricing documentation aims to combine compliance-oriented and policy-guiding approaches by developing intercompany pricing policies grounded in sound business strategy and well-established economic principles. Our thorough analysis of the industry structure and its value chain combined with rigorous analytical methodologies and clear presentation of the results allow us to develop transfer pricing solutions that meet both our clients’ business objectives and the arm’s length requirements imposed by national tax authorities.
Masterfile Documentation
A "masterfile" approach to transfer pricing documentation is a practical and cost-efficient solution for MNCs with operations in a group of countries that follow a common set of transfer pricing principles, such as those outlined in the OECD Transfer Pricing Guidelines or in the Pacific Association of Tax Administrators documentation requirements.
Best practices in creating masterfiles combine the centralized approach to documentation development with information gathering and review at the local level. NERA’s global network of transfer pricing experts provides MNCs with the capabilities to utilize our extensive data resources to implement this robust approach.
FIN 48 Support
FASB Interpretation No. 48 (FIN 48) outlines procedures for recognition and measurement of uncertain tax positions in order to record them on financial statements. In a transfer pricing context, the tax benefits are often considered equivalent to the lack of increased income recognition in a given country resulting from transfer pricing adjustments imposed by the local tax authorities. Transfer pricing has a significant impact on FIN 48 disclosures of MNCs.
NERA assists clients with several aspects of FIN 48 implementation including:
- Reviewing intercompany transactions to determine the appropriate units of account and material income tax positions, and to create appropriate recognition and measurement methods.
- Providing advice on audit policies and administrative procedures followed by the tax authorities in different countries.
- Preparing transfer pricing documentation to inform management’s opinion that the tax position will "more likely than not" be sustained upon examination.
- Setting up measurement procedures that involve calculating the amount of tax benefits related to transfer pricing, projecting alternative outcomes that might be realized in resolving the position, calculating probabilities of realization of each outcome, and cumulative probability analyses.
- Creating an implementation process to update FIN 48 analysis on a quarterly and annual basis.
