When it comes to strategic decisionmaking, planning and risk management, transfer pricing is a critical issue for domestic and multinational companies, as well as corporate tax executives.
Ioannis Nanos, Director, Tax, Grant Thornton
Christos Kodos, Partner, Tax and Business Process Outsourcing, Grant Thornton
For Greek taxpayers, transfer pricing has been mainly viewed as a compliance exercise: the preparation of transfer pricing documentation to support the pricing of intra-group arrangements as declared in the transfer pricing disclosure form filed with the tax return. However, transfer pricing goes beyond compliance. Backed by thoughtful analysis and agile expertise, it can become a useful tool for supporting and optimizing a group’s market expansion.
Several Greece-headquartered groups are currently seeking to expand their operations in Europe, the United States of America, and the Middle East in order to explore market opportunities and potential synergies with other major players. These groups are considering various market, operational, and other issues related to their expansion into new markets. However, transfer pricing is not always a high priority, and this can result in lower efficiencies from a business and tax perspective.
Backed by thoughtful analysis and agile expertise, transfer pricing can become a useful tool for supporting and optimizing a group’s market expansion
Firstly, businesses with appropriate transfer pricing strategies can control profit allocation among group members. This allows businesses to align value creation with profitability and support the establishment of subsidiaries in new markets with lower margins to gain market share.
Further to this, businesses can enhance liquidity management with the use of an efficient transfer pricing framework by transferring funds to the entities that need support. This can be achieved through real time monitoring of the transfer prices, while any discrepancies can be identified and addressed quickly during the financial year. From this perspective, transfer pricing can also play a pivotal role in relation to the repatriation of profits from foreign subsidiaries in an efficient manner.
Lastly, groups with defendable transfer pricing policies can manage global tax burdens effectively while ensuring compliance with local tax and transfer pricing requirements.
