The core services provided by TPS include customized advice in the following areas:

Transfer pricing review Transfer pricing documentation Benchmarking studies Transfer pricing planning Advance Pricing Arrangements Audit defense Transfer pricing due diligence Transfer pricing training FIN 48 reviews General Tax Assistance






Transfer pricing review

Within the transfer pricing review, we perform an analysis of your inter-company dealings, transaction by transaction.

In order to assess the transfer pricing risk associated with your related party transactions, we will review the inter-company agreements, the transfer pricing policies available at the group level, the compliance of your group transfer pricing documentation with the local rules, the availability of the supporting documentation, as well as any other documentation supporting your transfer prices.

In our review, we may focus on the local company or we may take a multi country approach reviewing the intra-group flows within a specific region.

Furthermore, we will provide you with a report that would include our comments on:

  • the tax risk associated with each inter-company transaction, including an estimate of the potential tax adjustment (where possible);
  • the appropriateness of the existing transfer pricing documentation (if the case) by identifying whether the related party transactions carried out by your company are: transactions with sufficient and compliant documentation; transactions covered by group documentation that requires amendment and/or disclosure of additional information; transactions that lack documentation and for which transfer pricing documentation needs to be prepared.

If, during our review, we will identify tax optimization opportunities, we will bring them to your attention. Where appropriate, we will also recommend to you alternatives for structuring your inter-company transactions.

As transfer pricing has become a priority issue for examination by Serbian tax authorities, it is likely that your intra-group transactions will come under scrutiny sooner or later. Nobody likes such surprises, so be prepared and act accordingly: perform a transfer pricing review of your related party transactions.

Transfer pricing documentation

If you carry out transactions with related parties, you should know that you have the formal obligation to prepare a transfer pricing documentation file and present it to the tax authorities.

When it comes to preparing your transfer pricing documentation, we are the best place to come to. This is due not only to our extensive experience in this field, but also to our unique and flexible approach under which we give you the option to involve one of your colleagues during the entire process of drafting the transfer pricing documentation file. This approach would not only result in cost savings for you, but it would also allow a transfer of knowledge from us to you. An additional benefit would be that you get an in-house transfer pricing specialist that may further monitor the transfer prices used by your company or draft the transfer pricing documentation file for the next years, pursuant to a limited review from our side.

Whether you sell finished products, license intellectual property or provide guarantees to a related party, we can document all types of your inter-company transactions. In the area of documentation, our services include:

  • planning and prioritizing the inter-company transactions to be documented based on a risk assessment analysis, resource availability and your budget;
  • review of the transfer pricing documentation prepared internally by your team, which needs updates or which is prepared at the group level but needs compliance with local requirements;
  • development of benchmarking studies to support the transfer prices charged;
  • advice on the most appropriate transfer pricing methodology for a given transaction;
  • assistance with the functional interviews and financial analysis.

With the transfer pricing documentation requirements becoming binding in the Republic of Serbia starting with 2001, and with the specific requirements with regard to the content of the transfer pricing file being released in 2013, intense investigation by the tax authorities will follow.

Basically, any company operating in the Republic of Serbia and conducting transactions with related entities both residents and non-residents can expect during a tax audit a written request from the tax authorities to present the transfer pricing file. Failure to present the transfer pricing documentation file or presenting an incomplete file may trigger estimation of the transfer prices by the tax authorities that may result in material additional tax liabilities.

Therefore, sooner or later the tax authorities will request your file. You should not wait for their request as it may be a little late for your company to avoid the potential transfer pricing penalties and adjustments.

So, start preparing your transfer pricing file! You may start this exercise by considering the practical steps listed below.

Benchmarking studies

The purpose of a benchmarking study is to identify comparable transactions that are further used to assess whether the inter-company transactions under review comply with the arm’s length principle.

Performing a benchmarking study to test the arm’s length nature of an inter-company transaction is a complex process that requires examination of various databases and sources of information such as Amadeus, RoyaltyStat, LoanConnector, Bloomberg etc.

Whether you have to justify the arm’s length nature of an interest rate, guarantee fee, royalty rate or the selling price of a tangible product, we can help you. We have the databases and capabilities that would allow us to perform all types of benchmarking studies in order to assess whether your inter-company transactions satisfy the arm’s length standard.

We can either perform these benchmarking studies as part of the transfer pricing documentation file or as part of your planning exercise.

Transfer pricing planning

Through transfer pricing planning, we can assist you in restructuring the inter-company transactions so that they are aligned with your business model and your corporate strategy. This may require advice on how to structure your cross-border and domestic activities and how to develop and implement the optimal arrangements of activities that are both tax efficient and economically based.

Our assistance in this area may include the following services:

  • review of the inter-company arrangements;
  • preparation of a conversion documentation supporting the change in the business model;
  • preparation of benchmarking studies;
  • preparation of a transfer pricing documentation file;
  • development of sound documentation of transfer pricing policies and processes;
  • preparation and submission of an individual tax ruling and/or APA.

Advance Pricing Arrangements applications and assistance

As transfer pricing is a complex subject with a lot of room for interpretation, more and more multinationals look for upfront agreement with the tax authorities on the pricing policy they would like to apply. This can be done through an Advance Pricing Agreement (APA).

An APA is a contract, usually for 5 years, entered into by a taxpayer and one or more tax authorities specifying the pricing method that the taxpayer will apply to its related-company transactions.

The APAs are extensively used as a risk avoidance strategy as they help taxpayers voluntarily resolve actual or potential transfer pricing disputes in a proactive, cooperative manner with the tax authorities.

Assistance with APA requests is one of our core services. If you are interested to apply for an APA, we can guide you through the whole process. This includes arranging for a preliminary meeting with the tax authorities, drafting the APA application and assisting you during the negotiations with the tax authorities so that you obtain a favorable outcome.

Audit defense

With transfer pricing becoming a hot topic on the agenda of the tax authorities, you should not be surprised if your company will be subjected to a tax audit soon.

During the tax audit, you will have to hand in the transfer pricing documentation file, defend your position, explain the rationale of your inter-company transactions and justify the transfer prices used.

You should not worry, as we can help you during all stages of the tax audit. Through understanding the economics of your business, we will assist you in the discussions with the tax authorities and we will help you defend your position. Just let us know that you are undergoing a tax audit and we will pay you a visit to discuss the audit strategy.

Transfer pricing due diligence

There may be a moment in time when your company will consider purchasing a business. A report with the potential transfer pricing exposure associated with the target company can be an important tool in your hands during your negotiations. Moreover, such a report will reduce the risk of unpleasant surprises after the transaction is completed.

We can provide you with such a report. Upon your request, we are available to perform a transfer pricing due diligence aimed to identify the transfer pricing exposure associated with the targeted company as well as to provide you with assistance during the post-acquisition phase such as business restructuring and implementation of the new transfer pricing policies and business model.

Transfer pricing training

The transfer pricing training is another way for us to share our knowledge with you!

Being a new field but of an upmost importance in the current economical situation, we understand the need of finance professionals to come up to speed with the complexity of transfer pricing.

The trainings are addressed to top decision makers such as CFO’s, finance directors, tax managers, or to any company representative that is in charge of transfer pricing compliance and planning in your company.

Our trainings will be customized based on each company’s needs and can cover a wide range of topics. You will have the chance to find out more about transfer pricing policies, documentation, and strategies that can provide your company with ideas on how to minimize and avoid the transfer pricing risks.

For best efficiency, we will come to your office to deliver the trainings. Through real life examples, in an open and dynamic conversation, we will pass you through the current transfer pricing environment in the Republic of Serbia, the tax authorities practice, exploring all the trends and issues but also the opportunities and we will answer all the questions you might have.

Please contact us so we can establish together your needs and a customized agenda for the training.

FIN 48 reviews

FIN 48, Accounting for Uncertainty in Income Taxes, applies to all entities that prepare GAAP financial statements and it prescribes a comprehensive model for recognizing, measuring and disclosing the impact of uncertain tax positions in U.S. GAAP financials.

FIN 48 requires that each "tax position" be evaluated to determine whether all, part, or none, of its related tax benefit should be recognized for US accounting purposes. Generally, a "tax position" is:

  • a deduction in determining taxable income;
  • an exclusion from, or reduction of, taxable income;
  • a shift of income between jurisdictions through transfer prices;
  • a decision regarding the characterization of income, that has been taken, or is expected to be taken, in a tax return, or by not filing a tax return.

FIN 48 establishes a two-step process for determining the amount of a tax benefit to record for tax positions (deductions, exclusions, or credits):

  1. Recognition phase – within this phase, companies need to determine and assess all material positions taken in any income tax return as of the date they adopt FIN 48, including all material uncertain tax positions, in all tax years that are still subject to assessment or challenge by relevant taxing authorities. The recognition threshold is met when it is concluded that it is more likely than not that the taxpayer will sustain the tax benefit in a dispute with the taxing authorities, based upon the technical merits of the position.
  2. Measurement phase – a tax position that meets the more likely than not threshold is measured to determine the amount of benefit to be recognized in the financial statements. The tax position is measured at the largest amount of benefit that is greater than 50% of it being likely realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information.

For many multinationals their most significant uncertain tax position will be in relation to their transfer pricing. Therefore, compliance with FIN 48 standard from a transfer pricing perspective requires a potentially large amount of work in identifying all relevant positions and carrying out the recognition and measurement assessment. A FIN 48 transfer pricing review will consider the quality of available transfer pricing documentation, existence of inter-company agreements, particularities of internal policies and procedures, inter-company invoices, overall entity profitability and testing to determine whether actual charges or economic returns fall within the range of arm's length results.

Compliance with FIN 48 standard from a transfer pricing perspective also increases the importance of contemporaneous transfer pricing documentation that should be expended to support the conclusion that transfer prices charges are sustainable on their merit.

In view of the above, TPS developed a transfer pricing risk assessment methodology allowing us to examine, evaluate and monitor from a FIN 48 perspective the risks associated with your intra-group transactions in an efficient and cost conscious manner.

Assistance with FIN 48 analysis and compliance is one of our strengths. If you are interested to know more about our FIN 48 methodology or other type of transfer pricing risk management issues, please contact us.