Transfer Pricing - efficiency versus cost while reducing tax exposure.
Every international transaction between related parties is exposed to transfer pricing regulations.
The transfer pricing department at Fahn Kanne recognizes the need to meet the regulatory requirements concerning transfer pricing, while preserving efficiency versus cost and reducing possible tax exposure. Our firm provides an overall solution that is tailored to the needs of the client, the goals of the organization and the nature of the transaction.
The principles of transfer pricing were introduced to the Israeli market in 2006, further to the going into effect of the transfer pricing regulations. Legislation on this issue is a work in progress and the requirements of the tax authorities are continuously on the rise.
To whom this service is geared
The service is targeted to every company that carries out international transactions with a related party (e.g., parent company – subsidiary, jointly-held company, etc.).
Transfer pricing field
The area of transfer pricing constitutes part of Fahn Kanne's tax department. The firm has made it a goal to be a trailblazer in this area in Israel.
The professional staff specializing in this area has extensive experience in the fields of accounting, tax, law, and economics. The rich experience amassed by local staff, in addition to the unique cooperation with other firms in the Grant Thornton International organization, allow the transfer pricing division to develop and formulate a varied transfer pricing policy which is tailored to the needs of each client, while placing an emphasis on providing a practical business solution.
A variety of services
Our firm offers a broad range of services, while ensuring that our clients are provided with personal service from the beginning of the process to its conclusion. The following is a summary of the services offered:
- Planning a transfer pricing strategy in various areas:
A preliminary market study prior to execution of the transaction. The objective of the study is to estimate the market price and feasibility of the transaction, from the standpoint of the expected tax consequences of the transfer prices of the transaction. This work can take the form of a transfer pricing memorandum, full study documentation, or some other format, all in accordance with the needs of the client. After consummation of the transaction, if necessary, the work in the abovementioned reports can be updated.
- Development and formulation of a transfer pricing policy
According to Israeli regulations and the regulatory requirements of the relevant foreign country.
- Preparing market studies in the area of transfer pricing:
- Full study documentation in real time. This study could assist the client in the future if it is required to furnish the information to the tax authorities. Preparation of the report in real time reduces the risk to management which is subject by law to a reporting requirement, maximizes the profits of the group and prevents payment of enlarged penalties in Israel and other countries.
- Full study documentation after the fact. Usually further to the demands of the tax authorities.
- A partial study in real time or proximate to the date of the transaction. This study may assist the client when it has to sign the annual report. This work is provided as a supplement to the full study documentation mentioned above.
- Preparation of a transfer pricing memorandum:
- Accompaniment and negotiations with the tax authorities for purposes of obtaining a ruling:
This process which takes place prior to the execution of the transaction, provides the company with peace of mind as far as the tax authorities are concerned, for a period of three years. The service includes:
- Preparation of transfer pricing planning for purposes of obtaining a ruling.
- Participation in the deliberations with the tax authorities for purposes of obtaining a ruling on the price of the transaction and the resultant amount of the transfer pricing.
- Accompaniment of Israeli companies during transfer pricing audits performed by the income tax authorities.
- Presentation to the client:
Preparation of a short presentation which will show the client if the transaction that was carried out was indeed in accordance with market terms.
Phases of the service
- Identification of international transactions as defined in the transfer pricing regulations
- Identification of similar transactions executed by one of the parties with an unrelated party and/or transactions having comparable characteristics with those of the transaction being scrutinized
- A functional analysis of the parties, including an analysis of economic risks and assets used to carry out the transaction. The goal is to understand the nature of the transaction
- An economic analysis of similar transactions
- Preparation of full study documentation or a transfer pricing memorandum in respect of the reported transaction, in accordance with the requirements of the client
Unique international forum
The Grant Thornton International organization set up a unique forum for the sharing of information and making direct contact between all of the transfer pricing experts in the member firms of the organization. This avenue is at the disposal of our clients and assists in promoting transactions and facilitating the tax planning that is needed when conducting transactions around the world.
The following is a partial list of the countries which are members of the forum:
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