Country-by-country and transfer pricing life cycle
The OECD has provided the final BEPS report on Action 13 dealing with CbCR in October 2015. Multinational Enterprises (MNE) with group revenues exceeding a predefined threshold (i.e. EUR 750 million) have to take action and implement an adequate CbC Reporting for fiscal years starting on or after 1st January 2016. The first CbC reports must be filed in 2017. Gathering and aggregating the CbCR data and ascertaining the accuracy, consistency and appropriateness of that information will be key for any MNE‘s data capturing process and technical solution.
Country-by-country reporting in Slovakia
Country-by-Country reporting has been implemented into the Slovak legislation through an amendment of the Act on international cooperation in tax administration matters, effective from 1 March 2017.
Further to the legislative amendment, entities which are part of a group of multinational enterprises, as defined by the law ("MNE"), with consolidated revenues over EUR 750 mil. need to file either a CBCR in Slovakia or a Notification on which entity (and in which jurisdiction) will be filing the report. Most of the companies in Slovakia need to submit only the Notification with the Slovak tax authorities stating basic information (the full name and address of the Slovak Entity filing the notification (i.e. the taxpayer), the full name, identification number and full address of the Group entity which will be responsible for submitting CBCR).
The deadline for submitting the Notification is the same as the deadline for submitting the Slovak Corporate Income Tax return for the respective tax period. A penalty up to EUR 3,000 (also repeatedly) may be imposed for not filing the Notification.
How can PwC work with you?
PwC’s transfer pricing professionals can help you to improve compliance, transparency, efficiency and communication strategy and processes, leading to a more streamlined approach, reduction in workload, increased accuracy of charges, significantly enhanced transparency, and - not least - well-positioned documentation to support future reviews, including local statutory audits.
Transfer pricing life cycle
The benefits of a more strategic management of the transfer pricing can be widespread and long-lasting. These include:
- Meeting statutory requirements more quickly; improving compliance, transparency, efficiency and communication
- Reducing audit risks and costs of audit defence
- Maintaining better internal tax controls
- Standardising data collection processes and transfer pricing calculations by using new technologies design for transfer pricing purposes.
- Performing efficient transfer pricing scenario analysis
While transfer pricing compliance is principally a matter for senior tax executives, responsibility for the actual execution of inter-company transactions is generally spread out across a broad chain of often detached internal functions and distant offices.
The entire process typically involves multiple hand-offs between tax, regional/global controllership, shared services, information technology, and external advisers. In the absence of unified oversight or co-ordination, fiscally unsound conditions can develop at every transaction point. These can include:
- Ambiguities of responsibility
- Manual, informal, “ad hoc” practices
- Accounting-policy or data mismatches
- Insufficient mechanisms for reconciliation
- An overreliance on personal relationships or specific function “heroes”
- Undocumented interpretations of ambiguous terms in inter-company agreements
It’s easy to see how these conditions can expose multinational organisations to significant risks, including compliance and tax risks (material errors) and gross inefficiencies - not to mention frustrations resulting from breakdowns in the execution chain.
Clearly there is a need to address transfer pricing as a more holistic process, one that draws together the wider chain of activities into a well-defined set of procedures - from strategy, all the way through your financial and operational systems, to your local financial statements and tax returns.
“Consistency is a critical area of focus. The written words in the MF/LF should provide the background to the data in the CbC report and should be consistent with other relevant documents, such as table of the Corporate Income Tax Return.”
Managing transfer pricing beyond the tax department
While transfer pricing compliance is principally a matter for senior tax executives, responsibility for the execution of inter-company transactions is a shared responsibility with many other internal functions. From tax to controllership to shared services centers, there are multiple handoffs and rarely someone with oversight for the entire operational process.
Current processes often reliant on excel spreadsheets struggle with today’s demands for fast, if not immediate, access to information and to minimize risks due to execution failure.
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