Key Operational Transfer Pricing Challenges to navigate
Implementing transfer pricing policies is critical for companies engaging in inter-company cross-border transactions. However, the implementation of transfer pricing policies is riddled with challenges spanning data, processes, people and technology.
Operational transfer pricing involves the implementation of transfer pricing policies within an organization. Getting the operational transfer pricing right is challenging for most of the companies in Dubai but transfer pricing consultants can help them.
Promptly addressing the operational transfer pricing challenges can help Multinational Enterprises (MNEs) have more control over their transfer pricing arrangements. This blog points towards the key operational transfer pricing challenges you must immediately address:
Multiple Data Sources
Most MNEs depend upon multiple data sources, making them manually extract, organize, and improve the data. This is a significant investment that makes operational transfer pricing more challenging and complex.
Tips to overcome this challenge: Integrate all transfer pricing data into a robust centralized repository.
The Tax-finance Gap
The thin line between tax/transfer pricing and finance/accounting is often tough to manage. While the former sets policies, the latter turns them into action.
Your team must learn how to differentiate between both.
Tips to overcome the challenge: Teamwork among tax professionals and accountants within your organization is required.
Not Choosing Right Tech
Relying upon Excel spreadsheets can make your transfer pricing policy implementation more challenging. Tools like spreadsheets lack adequate controls, making it difficult to carry out calculations or provide supporting information requested by the Federal Tax Authority (FTA) during transfer pricing audits.
Tips to overcome this challenge: Use automated accounting tools or software that are widely available in the market. Transfer pricing consultants can advise you on the software available in the UAE and help you choose the right one.
Poor Risk Management
Most companies that carry out cross-border transactions lack robust risk management frameworks and controls. This deficiency often stems from the lack of a wider governance framework.
Tips to overcome this challenge:
- Implement robust controls
- Maintain supporting documentation
- Clearly define roles and responsibilities across the teams
- Conduct a review of all transfer pricing processes
Key Person Risk
Your transfer pricing implementation is at risk if specific information is being held by a particular team member. The risk aggravates when that person leaves or retires and you won’t be able to continue the processes without him or her.
The risk will be greater if large and complex models are implemented or documentation is not adequate.
Tips to overcome this challenge: Give transfer pricing implementation training to the staff and transfer the knowledge to more team members. Our transfer pricing advisers provide transfer pricing implementation services for companies in Dubai and other Emirates in the UAE.
Not involving stakeholders early on
All key stakeholders must be engaged early on and often while implementing the transfer pricing policy within the organization. Transfer pricing arrangements will affect how revenue and costs flow between the entities. Changes in transfer prices will have an impact on all the aspects of a corporate group. Not involving the key stakeholders will negatively impact the transfer pricing implementation.
Tips to overcome this challenge: Involve finance, accounting, and other stakeholders early when making adjustments.
Transfer Pricing Consultants can Help You
MNEs need to proactively address these challenges to make their transfer pricing implementation robust. Tax Gian, a brand of Jitendra Tax Consultants (JTC), can help you overcome the major operational transfer pricing challenges.
We are one of the best transfer pricing consultants operating in Dubai and other Emirates in the UAE. Tax Gian’s world-class transfer pricing advisers deliver innovative strategies that can be easily implemented in companies across the UAE. Call us to talk about your unique transfer pricing challenges and learn how Tax Gian can help solve them.
