Intercompany Effectiveness

A structured approach to managing operational transfer pricing

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Operationalizing transfer pricing policies is a big challenge for many multinationals. EY’s Intercompany Effectiveness offering provides a structured and scalable framework for improving transfer pricing implementations and building integrated systems and processes across tax, business units and operations.



Our flexible approach can help you develop sustainable practices to execute, monitor and report intercompany transactions.

EY - Watch our TP Web™ Introduction Video

 

A root cause of practical challenges when managing operational transfer pricing within a global environment is commonly the lack of integration of Tax and Finance. This can lead to a range of problems including:

  • Unclear roles and responsibilities for setting, monitoring and adjusting transfer prices
  • A lack of financial reporting for transfer pricing purposes
  • Year-end transfer pricing adjustments that disrupt accounting closure and reporting processes

Achieving transfer pricing compliance is key to all multinationals, but it is not the only goal that could help your organization. Consider other objectives, such as:

Supporting business decisions

Stronger management of operational transfer pricing can lead to reduced compliance costs and more robust tax and financial reporting. Also, more accurate transfer pricing often determines the economic value of an intercompany transaction. Better information gives executives the ability to make more informed decisions at the strategic financial level and at more detailed product, service and territory levels.

Managing compliance and risk

Improved management and control of operational transfer pricing can facilitate more compliant, transparent and consistent execution and provide greater access to data. The enhanced information can support your ability to provide tax authorities with more timely responses to inquiries. Doing so could mitigate the risk of transfer pricing adjustments, penalties and double taxation. 

Driving efficiencies

Standardized, consistent and clear processes for executing intercompany transactions can reduce the time spent managing operational transfer pricing, including year-end accounting closures and price setting and adjustment discussions. Efficient documentation and agreement processes and tools can effectively reduce the cost and time spent on these and other downstream processes, such as the production of entity financial accounts and tax returns. 

We designed the framework to help you to efficiently integrate your tax and finance teams across the transfer pricing lifecycle. Our approach considers the interdependencies of the operating model to better control and manage transfer pricing across the business processes of price setting, monitoring and reporting.

EY - Operational Transfer Pricing

We help you incorporate these recurring processes and test the results to show tax authorities that the prices you set for intercompany transactions conform to applicable rules and regulations.

EY - Operational Transfer Pricing

Our services include:

  • Maturity Model: we use a comprehensive, web-based survey to assess your current state, define your aspirations and identify what’s needed to achieve them. Our professionals have the experience and knowledge to benchmark your operations against leading practices.
  • Profitability Monitoring and Reporting: we help you set, monitor and manage your intercompany prices in alignment with your transfer pricing policy and the organization’s business objectives.
  • Service Calculation and Allocations: our method can streamline and standardize the data collection, analysis and reporting of intercompany services and intellectual property transactions.

We maximize technology platforms to facilitate and accelerate the work, and provide the transparency that regulators require. Our teams can show you how to get the most out of your existing systems, and our proprietary software can supplement what you currently use. Products include:

  • The EY Services Analyzer quickly processes large volumes of data to generate reports for service calculations. The tool allows you to forecast, implement, monitor, adjust and report intercompany services and IP transactions on an arm’s-length price basis.
  • The EY Profitability Monitoring Tool can capture account or transaction-level detail to support price-setting, profitability monitoring and recalculations of price changes or adjustments.
  • The Intercompany Operations Portal simplifies data collection and reporting, collaboration, workflow management, status tracking and document retention.
  • TP Web™ is a secure, documentation tool that helps you leverage group-wide information and avoid redundancies in reporting packages, such as those required under Base Erosion and Profit Shifting Action 13.

We can guide you through the selection and implementation of the technology tools that best align your business and transfer pricing requirements.

As organizations change, adjust, or expand their global footprint, their intercompany environment and transfer pricing become more complex.

Ask yourself:

  • Do you spend a substantial amount of time on internal discussions related to intercompany transaction pricing?
  • Do you invest significant resources and time preparing transfer pricing documentation?
  • Are the roles and responsibilities related to intercompany transactions unclear?
  • Are there uncertainties regarding financial and tax reporting in your legal entities or business units?
  • Do you struggle with large year-end adjustments?

If you answered yes to any these questions, you have an opportunity for your company to operationalize processes and policies throughout your organization.

Here are examples of how we helped other companies

 

It takes broad experience to bring these processes to life. Our Intercompany Effectiveness teams are skilled in tax, advisory, technology, process improvement and operating model effectiveness.

Project challenge

A large multinational company struggled with disparate manual and ad-hoc methods for executing intercompany services cross charges.

Objectives

To help the company improve tax performance by implementing the technology necessary for creating efficient and accurate cost allocations and reports

Approach

  • Devised a single platform to help the company execute and manage intercompany services allocations and invoice postings
  • Used proprietary technology to help them implement a partially automated, systematic process with controls and checks
  • Defined the necessary data requirements for tax calculations and data elements in their enterprise resource planning system

Value delivered

  • Systematic and organized data collection, calculation and invoice posting significantly reduced the amount of time and resources previously spent on these tasks.
  • Transfer pricing analyses at the most granular level yielded tax benefits.
  • The improved tax performance fostered a higher level of comfort for charges and audit support.

Project challenge

A multinational company battled year-end adjustments and double taxation because they monitored their intercompany profits and managed their intercompany prices manually.

Objectives

To help the organization employ technology for monitoring their intercompany profits by entity and business unit

Approach

  • Defined the price and margin management user requirements
  • Identified and assessed new data sources
  • Worked with the IT department to select a platform they could use with other IT projects
  • Designed an embedded technology solution that allowed the client to monitor the details of their intercompany profits by entity and business unit

Value delivered

  • Executives gained detailed insights into segmented intercompany profits.
  • The organization reduced the manual workload and year-end adjustments, and increased control of the end-to-end transfer pricing process.

EY’s Intercompany Effectiveness teams can help you identify the right processes to increase efficiencies, manage compliance and risk and enhance the business value from your operational transfer pricing environment. Contact us to learn more about the potential benefits.

EY’s Intercompany Effectiveness teams can help you identify the right processes to increase efficiencies, manage compliance and risk and enhance the business value from your operational transfer pricing environment. Contact us to learn more about the potential benefits.