Transfer pricing across borders: our international solutions

Transfer pricing is (primarily) an international issue. Why? Because business is international. These two aspects are intertwined and complete each other. Increasingly, organizations recognize the value of strategic transfer pricing management. Well-structured transfer prices not only supports robust business development, but also promotes it. However, it is crucial to remember that transfer pricing are not yet globally harmonized.

So, how do you manage transfer pricing in your organisation to avoid pitfalls, and how can MDDP assist you in this endeavour?

First and foremost, at MDDP, we support organisations in growing consciously by leveraging the full potential of transfer pricing legislation. What does this mean in practice? The business world is highly complex, making it crucial for leaders to anticipate the consequences of their decisions. For related party transactions, the strategic use of transfer pricing rules that enables this foresight. The essence of transfer pricing lies in planning, rather than just documentation and reporting obligations.

In transfer pricing, we have a variety of tools to assist us, including in particular:

Transfer pricing models

• We assist our clients at every stage of their development, whether they are establishing their first or next company in Poland or abroad, or engaging in intra-group transactions. We determine the functional profiles of the companies and develop settlement models, specifically transfer pricing models.
• For almost 10 years, we have been successfully overseeing and implementing full-scope transfer pricing projects from the HQ level (i.e. parent companies).

Transfer pricing analyses (benchmarks)

• We help our clients determine how remuneration should be determined for a transaction based on the arm’s length principle and transfer pricing rules. We assess what level of profit we can be considered market-based and advise on actions to take if the company does not achieve the expected profit level. This guidance facilitates the subsequent planning and budgeting process.
• Transfer pricing analyses are the most crucial tool for defending the marketability of settlements in the event of an audit. We understand this importance, which is why we prioritize delivering high-quality analyses.
• When preparing benchmarks, we prioritize reliability and security. We use professional databases accessible to tax authorities and global tax advisory firms, and we create reports that ensure 100% transparency of the process.
• It is important to note that transfer pricing rules are not yet harmonized at global and EU level. Therefore, our benchmarks consider both local requirements and international standards, including the OECD Guidelines.

Although work is currently underway within the EU to harmonize TP rules, the lack of harmonization at the international level presents a significant challenge for companies seeking to grow internationally. Therefore, when supporting our clients, we combine local perspective (on our own or in cooperation with foreign advisors) with our international experience.

This approach is particularly important for groups operating or planning to operate in Poland where non-compliance or unreliable compliance with transfer pricing obligations can incur some of the highest penalties. For example, fines can reach up to PLN 40 million, and personal liability may be imposed on those responsible for the company’s financial affairs, particularly board members.

But fear must not impede progress

In today’s world, success often demands a degree of flexibility and courage. That is why having a trusted yet experienced advisor by your side can prove beneficial. We stay updated on Polish and international regulations and actively participate in commenting on legal acts. In Poland, we engage in working groups at the Ministry of Finance. With our expertise, we can clearly guide our clients and navigate any potential ambiguities.

We believe this is a good opportunity to introduce ourselves and our upcoming international solutions, which we will be discussing in future posts.