Documentation & Compliance
As multinationals globalise and countries adopt stricter rules for transfer pricing, the compliance requirements associated with transfer pricing reporting and documentation have increased. Think about the OECD action plan on base erosion and profit shifting that aims at implementing a new three tiered approach on transfer pricing documentation.
In addition, the Luxembourg government envisages implementing general transfer pricing legislation within the coming months. We have been following and monitoring these evolutions very closely. We can assist you in developing new transfer pricing policies and performing risk reviews on your current transfer pricing policies and subsequently documenting those policies in line with local and OECD requirements.
Transfer pricing advice will often involve more than one country. There we apply PwC’s Global Coordinated Documentation (GCD) system that offers a streamlined alternative that helps multinationals deal with the requirements of multiple jurisdictions in an efficient and coordinated manner.
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.
We can help you reinvent your E2E (End-to-End) 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.
Advance Pricing Agreements
To reduce uncertainty on a prospective tax position, we can assist in obtaining Advance Pricing Agreements (APAs) from the tax authorities in Luxembourg. In addition, where a multi-country approach is more appropriate, we can assist in obtaining multi-lateral APAs.
Defence and dispute resolution
Fiscal demands on developed and emerging countries have placed considerable pressure on governments to raise revenue and prevent the erosion of their tax bases. Governments worldwide are cooperating as never before to share taxpayer and industry information, assist other countries with document and information requests, and participate in separate multi-country audits (including “simultaneous” examinations). Some countries are even considering the concept of "joint audits" where a single audit team--comprised of government tax inspectors and auditors from two or more countries--examines a specific taxpayer. At the same time, MNCs are experiencing increasingly complex regulations, heavy penalties, and transparency and disclosure issues.
We work closely together with our Tax Controversy and Dispute Resolution team in case of disputes, tax audits or information request relating to transfer pricing. We can assist in dealing with transfer pricing disputes involving two or more territories through the various dispute resolution procedures.
Financial services transfer pricing
Since the onset of the financial crisis in 2008, the financial services sector has gone through some major local and global regulatory changes which have had a knock on effect in many of the transfer pricing models for all financial services firms.
Whether you’re in banking, capital markets, insurance or asset management industry, we can help - with sector-specific, locally grounded advice and solutions, including advance pricing arrangements, adapted to the markets you are in.
Asset management transfer pricing
Viewing Luxembourg’s position as second largest fund domicile, large part of our team is dedicated to transfer pricing for asset management. We are specialised in developing and defending transfer pricing policies for asset managers, especially around the remuneration of management companies, distributors and investment advisors. We have performed tailor-made benchmarking exercises for management companies operating in Luxembourg.
We work in close collaboration with PwC Luxembourg’s large asset management practice to ensure best practices. We closely link with the regulatory team to understand the impact of the ever-changing regulatory framework such as AIFMD, MIFID, RDR, local Case Law on transfer pricing policies.
Financial transactions transfer pricing
With the global financial crisis impacting credit markets, multinationals have relied more heavily on intercompany self-funding within a group to finance their operations. This high degree of intercompany self-funding and the budget deficits of governments around the world have resulted in an increased focus of tax authorities on the transfer pricing of financial transactions.
The correct application of the transfer pricing legislation for financial transactions has become a top priority for taxpayers. We can advise you on the factors to consider when setting an intercompany debt, and the alternatives available.
Next to ensuring compliance with the Luxembourg transfer pricing regulations around intra-group financial transactions, we can assist you in the review and development of a transfer pricing policy for all your financial transactions including loans, cash pooling arrangement, guarantees, etc.
Value Chain Transformation
Business restructuring is a complex process. For each business transformation, every facet of the organisation is involved, and the implications - operational, tax and legal - are wide in scope. Implementing an effective value chain management process that brings all these facets together is key.
Transfer pricing is an integral part of a Value Chain Transformation project. We work closely together with our Value Chain Transformation team to ensure proper design and implementation of transfer pricing when redesigning the value chain.