Transfer pricing is a key issue for all companies today. Transactions within groups of multinational or local companies significantly affect the results and thus the tax obligations of individual entities. This is a highly monitored area of the Czech tax administration. If transfer prices are insufficiently documented, the audit can become a very lengthy and unpleasant process that can result in additional tax, penalties or interest on arrears.
In addition, the correct setting of transfer prices is not just a tax issue. On the one hand it will help protect the owner's property and simplify flows within the group, on the other hand, incorrect setting can lead to a breach of due managerial care and unlimited liability of the executive director.
Not only are transactions between related enterprises considered to be dependent transactions, but also so-called "orders of the parent company", which means the influence of an independent transaction by a related enterprise, i.e. for example:
- the parent company's decision to sell to independent customers at the price determined by the parent company;
- the parent company's decision to purchase material only from independent suppliers approved by the parent company
The tax administration is currently increasing its emphasis on ensuring that documentation is processed in a transactional way, if possible. This means that each significant transaction should be subjected to a separate market margin compliance test.
How can we help you?
We will prepare transfer pricing documentation
1. With the help of a database, we compile a comparative analysis of transactions:
- sale of intermediate products or final products
- distribution of the product to the final customer
- provision of management services
- provision of science and research services
- granting the right to use intangible assets (licence)
2. We perform expert valuation of transactions:
- granting of loans
- provision of guarantees and other forms of security, etc.
- sale or lease of real estate or movable property
- transfer of function
3. We will process an application for the issuance of a binding assessment of transfer pricing settings
4. We provide expert consultancy on tax audits
As part of our transfer pricing advice, we will be happy to help you set up your transactions to achieve optimal results from an economic and tax perspective. Subsequently, we will prepare complete documentation or an expert opinion for the transfer prices, in which the selected setting will be included and justified. The advantage of transfer pricing documentation prepared by an expert as a possible means of proof is that the legal obligation to prove the statements made in the annex to the tax return relating to transactions with related enterprises will be fulfilled. The burden of proving the existence of a difference in the price agreed between related enterprises from the price that would have been agreed at arm's length in such circumstances remains with the tax administrator.