This section includes a list of the most frequently asked questions on transfer pricing

1. Who is subject to transfer pricing regulation?

Generally, most companies being part of a group and carrying out business transactions with other entities of the same group are required to prepare a transfer pricing documentation file. (find here the terms and conditions)

2. What qualifies two companies as related from a transfer pricing perspective?

The threshold for related party is mainly defined by 25% direct or indirect ownership as well as by 25% of the voting rights in the management bodies of a company. 

3. Which companies are more likely to be audited by the tax authorities?

Considering the developments in the other countries, the ”focus” is on the companies who recorded ongoing losses or lower/fluctuating margins, especially when these are unusual for the industry, those carrying out transactions with tax havens, significant transactions with services and intangibles etc.  

5. What are the applicable transfer pricing methods?

In determining the price of an intra-group transaction in accordance with the arm’s length principle, the following methods are used:

  • comparable uncontrolled price method;
  • cost plus method;
  • resale price method;
  • transactional net margin method;
  • profit split method;
  • any other method which makes possible to determine the price of a transaction in accordance with the arm’s length principle, provided that the application of the aforementioned methods is not possible or this other method is more appropriate to the circumstances of the case compared with aforementioned methods.

6. How do tax authorities make transfer pricing adjustments?

In case that the tax authorities challenged your transfer pricing documentation and conclusions set therein, the following step would be to determine the level of the transfer pricing adjustment. The value of the adjustment imposed by the tax authorities will be determined as the difference between the transfer price included in the taxpayer’s documentation and the value determined by the tax authorities. In cases when the tax authorities are using the transactional net margin method, their value will be determined as median value of the range of net margins shortlisted as the comparable ones.