There are several products available. Ken Crutchfield, vice president and general manager of ONESOURCE Transfer Pricing talks to TPWeek about the market.
“There is a trend towards transfer pricing being taken in-house by corporate tax departments. It is about taking a little more control of transfer pricing,” says Crutchfield.
“Corporations are looking to take these matters in-house, in part, because they know their business better than a consultant ever will. The functional analysis, the creation of the context for the transfer pricing work and so on is better understood by the corporation.”
The products are designed to be as user friendly as possible, keeping the set-up and process as simple as possible.
“With our Documenter users start typically with a tax year and set up entities in the software, it is possible to re-use entities and information that you put together about them,” explains Crutchfield. “Users then work through and conduct functional analysis. Select transfer pricing methods and go through a comparable search function; clients will be able to search against databases of comparables, particularly for a comparable profits method (CPM) style search.”
Companies can then go through rejection criteria to get down to a narrow set of comparables.
“Then at the end a report is generated which reviews and summarises the steps and logic taken to get to that point,” says Crutchfield.
The report can then be sent to the relevant authority if required, or tied into the income tax return. And of course the document is there if needed during audit.
Software like this varies greatly in cost. It depends largely on the size of your company and the countries in which you are doing business.
“For larger companies there are considerable savings to be made by using this type of product,” says Crutchfield. “And for smaller companies who aren’t really aware of what transfer pricing means for their business, sometimes this solution is the choice between doing nothing and something.”
Products such as these focus on the efficiencies of transfer pricing and can help to maintain consistency in methodology in the company’s global reports
“A lot of the times companies that are looking to bring some of their transfer pricing in-house are really looking to drive some consistency in their transfer pricing reporting. This provides a bit of harmonisation where as if a multinational company contracts out with different service firms and transfer pricing experts in different jurisdictions you might get different stories.”
But using a computer program to help with compliance matters does not replace the need to get specialist advice from advisers in some situations.
“Clients can run some planning scenarios using the product, but the focus is on documentation,” says Crutchfield. “It does not replace the need for an expert in the field for a really tough issue.”
One benefit of using a documentation assistance tool is that legacy information is built up, enabling new employees in the company to quickly establish what has been done before. And the software is often equipped to carry the company through to consecutive tax years.
“We have a roll-forward feature that allows you to move into the next tax year,” says Crutchfield. “It really depends on how a client wants to go about doing their transfer pricing. Some will take, for example, the comparable companies in a CPM and just update the financials for the remaining set of companies that are in there. Others may go the other way and re-answer all the questions that are part of the functional analysis to determine if there is something material that has changed in their business or their industry that would cause them to look at an entirely different set of comparable companies.”
