Transfer pricing

An international transaction between parties maintaining a special relationship is exposed to transfer pricing regulations. The field of transfer pricing is part of our international tax department. It is a field that has developed in recent years and it quite a lot of consequences for many international companies.

Background

In November 2006, the Israeli parliament passed transfer pricing legislation with regard to companies doing business in Israel. Commencing from that date, all international transactions conducted between parties maintaining a special relationship must report the transaction in accordance with market conditions and pay taxes accordingly. Legislation in this area is updated regularly and the tax authorities place considerable importance on assessing transfer pricing issues as part of the various proceedings they conduct.

Who can benefit from our transfer pricing services?

Our service targets all companies conducting transactions in the international arena with a related party (parent company, subsidiary, jointly-held companies, operating through a branch, etc.).

Transfer pricing and Fahn, Kanne & Co.

Our transfer pricing unit is part of the firm’s tax department. We are committed to being a leading provider of transfer pricing services in Israel.

Our professional staff consists of experts with backgrounds in accounting, taxation, law and economics. The extensive experience which we have amassed in this area, together with the close working relationships we maintain with members of the Grant Thornton International network allows us to develop and compile a varied transfer pricing policy that is custom tailored to the needs of the client and that provides a practical business solution to this important issue.

A variety of services

Our firm offers a broad variety of services, while ensuring the personal touch – we work closely with our clients from the beginning of the process to its successful conclusion.

Our transfer pricing services include:

• Advance planning of your transfer pricing strategy
• Development and compilation of a transfer pricing policy
• Documentation of transfer pricing
• Participation in and management of negotiations conducted with the tax authorities for purposes of obtaining pre-rulings
• Accompanying companies in transfer pricing audits conducted by the tax authorities
• Overall planning – international taxation and transfer pricing

Detailed explanation of our transfer pricing services

• Advance planning of your transfer pricing strategy

     An overall review of the transfer pricing issues and preparation of transfer pricing documentation prior to the execution of the transaction, in order to estimate the market price of the transaction and its economic feasibility. This work can be prepared in the form of a transfer pricing study, a memorandum or some other relevant format. After completing the transaction, the study can be updated.

• Development and compilation of a transfer pricing policy

     Development and compilation of a transfer pricing policy, while assessing the functions, assets and risks of the companies of the organization, for purposes of streamlining the organizational structure and/or the supply chain, thereby reducing risks. The assessment can be conducted according to Israeli legislation and in accordance with the regulatory regime of the relevant foreign country.

• Documentation of transfer pricing

-    Preparing a real-time transfer pricing study

     Preparation of documentation in real time may be of use to the client if he is asked to provide such documentation by the tax authorities. Preparing it in real time reduces the risks faced by management since they are subject to legal reporting requirements, it maximizes the profit of the Group and prevents payment of enlarged fines in Israel and in other countries.

-    Preparing an ex-post facto transfer pricing study

     Preparation of documentation after the fact, usually done after a request is received from the tax authorities or prior to the filing of a tax return for the relevant year.

-    A transfer pricing memorandum

     Documentation in real time or proximate to the time the transaction is executed may assist the client for purposes of signing the annual financial statements. The memorandum can be upgraded into a full blown transfer pricing study in accordance with legal requirements.

• Participation in and management of negotiations conducted with the tax authorities for purposes of obtaining pre-rulings

     This is a proceeding that occurs prior to the execution of the transaction and it may provide the Company with an arrangement with the tax authorities for a number of years.

     The service includes

-    Preparation of a transfer pricing study for purposes of obtaining a pre-ruling.

-    Participation in deliberation with the tax authorities for purposes of obtaining a pre-ruling on the price of the transaction.

• Accompanying companies in transfer pricing audits conducted by the tax authorities
• Presentation to the client

     Preparation of a summary presentation that will show the client whether or not the transaction was conducted on the basis of market conditions.

Stages of the service:

• Identification of relevant transfer pricing risks
• A functional analysis of the parties, an analysis of the general risks and the assets that were used in the transaction
• Identification of international transactions as the term is defined in transfer pricing legislation
• Identification of transactions carried out by one of the parties together with an unrelated party that are similar to the transaction currently being carried out
• An economic analysis of similar transactions
• Preparation of transfer pricing documentation in the format of a transfer pricing study or a memorandum for the reported transaction, in accordance with the requirements of the client.

A unique international forum

The Grant Thornton International network has set up a unique transfer pricing forum that facilitates availability of common information and a direct channel between all of the experts in this field who are active in the member firms of GTI. The forum consists of dozens of companies around the word and it is accessible to our clients and assists the in promoting transactions and in creating various tax planning scenarios that can be utilized in business activities carried out abroad.