Transfer Pricing and Operating Model Effectiveness

Our team of transfer pricing professionals is ready at any time to help your business face new challenges with confidence and thrive in a fast-changing environment.

The B1 transfer pricing and operating model effectiveness group unites more than 70 professionals who monitor developments in the market and regulatory enforcement practices and help clients to adapt promptly.

B1 TRANSFER PRICING SOLUTIONS PORTFOLIO

Tax authorities worldwide are intensifying transfer pricing scrutiny by developing and implementing new transfer pricing reporting requirements, enhancing audit mechanisms, increasing the quantity and quality of audit activities, and tightening penalties. As a result, businesses face a dual challenge:

On the one hand, they need to flexibly and promptly adapt their business models to the growing complexity of global supply chains
On the other hand, they must comply with transfer pricing regulations

To address both operational challenges and regulatory requirements, businesses need integrated solutions that transform transfer pricing from a risk area into a manageable business process.

TP Solutions is a suite of products covering all aspects of transfer pricing – from preparing documentation to supporting and protecting your company during audits. Each product is designed as a modular solution, allowing you to select the level of involvement that best suits your needs.

Depending on the structure of a group and the nature of transactions carried out by companies, different types of transfer pricing reports may be required in Russia and other jurisdictions.

TP.CORE

A basic compliance package designed to prepare transfer pricing documentation and conduct benchmarking studies to confirm the arm’s length nature of prices.

Result

Accurate and timely transfer pricing reporting and mitigation of transfer pricing risks.

TP.FULL

An extended package designed to draw up transfer pricing documentation, conduct benchmarking studies and prepare notifications of controlled transactions.

Result

Comprehensive coverage of all annual transfer pricing compliance obligations.

TP.TIER3

Turnkey preparation of a full three-tier reporting package (local file, master file and country-by-country report (CbCR)).

Result

Structured and consistent disclosure of information at both the group and local entity level.

TP.GLOBAL

Support for companies that are members of multinational enterprise (MNE) groups, including preparation of a local file and notification of participation in an MNE group, and adaptation of the master file and CbCR.

Result

Compliance with reporting requirements across group jurisdictions and consistent disclosure logic.

TP.TRACK

Regular monitoring of profitability and pricing throughout the year, followed by a final analysis prior to year-end reporting.

Result

Control of arm’s length compliance and the ability to adjust pricing in a timely manner.

TP.BUSINESS

TP.FULL (comprehensive compliance on a turnkey basis) as well as development or update of pricing methodologies for specific transactions or the entire value chain within a company or group.

Result

A formalized approach to pricing, periodic monitoring and documentation.

TP.360

An annual subscription for transfer pricing support, including advisory services on emerging issues and ad hoc assistance.

Result

Prompt resolution of issues throughout the year, alongside other activities (such as those covered by TP.FULL or TP.BUSINESS).

TP.DEFEND

Support during pre-audit reviews and transfer pricing audits, preparation of the company’s position and calculations, and interaction with tax authorities.

Result

Protection of the company’s interests and assistance in mitigating the risk of additional tax assessments.

TP.RESHAPE

Advisory support on transfer pricing issues related to business restructuring, including changes to value chains and reallocation of functions and assets.

Result

An optimized structure and a well-designed operating model aligned with the arm’s length principle and tax implications.

TP.RESHAPE

Advisory support on transfer pricing issues related to business restructuring, including changes to value chains and reallocation of functions and assets.

Result

An optimized structure and a well-designed operating model aligned with the arm’s length principle and tax implications.

TP.VIP

Full outsourcing of the transfer pricing function – from methodology and calculations to reporting and interaction with tax authorities.

Result

Turnkey management of the transfer pricing function (with additional services upon request).

The products can be easily combined and scaled to address specific tasks – from a one-off project to full support and comprehensive outsourcing of the transfer pricing function.

FINANCIAL SERVICES AND TRANSACTIONS TRANSFER PRICING

B1’s Financial Services and Transactions Transfer Pricing team consists of over 15 dedicated professionals and has offered specialized services to clients since 2012. Drawing on many years of expertise both within and outside Russia, we provide TP advice to financial and non-financial institutions of any size, industry and geography, covering all aspects of intra-group financial transactions.

Our professionals have hands-on experience in dealing with the tax authorities during TP audits of financial institutions and financial transactions and stay on top of evolving international and domestic legislation and court practice as well as the tax authorities’ clarifications and recommendations on financial transactions transfer pricing.

With access to transfer pricing benchmarking databases, B1 leverages its own robotic solution, B1FinBench, to analyze large data sets and determine arm’s-length ranges of prices for multiple controlled transactions.

Designing, planning, implementing, documenting, automating and defending TP methodologies and processes as part of tax audits and lawsuits involving various financial transactions, e.g.:

Lending and other debt financing
Cash pooling
Guarantees, sureties, letters of credit and other collateral arrangements
Factoring
Leases
Assignment of claims
Insurance and reinsurance
Derivatives
Other

B1 works with clients in the banking and capital markets sector, insurance companies, investment funds and private wealth and asset management firms to provide TP advice tailored to their industry and business needs.

Intra-group financial transactions and transactions with financial instruments:

Developing detailed transaction-specific methodologies consistent with the Russian Tax Code and OECD Guidelines
Identifying the most appropriate TP method for a given transaction, depending on its characteristics
Performing an arm’s-length pricing analysis for various transactions that are complex in terms of structure and performance
Analyzing large data sets and determining arm’s-length ranges of prices for multiple controlled transactions using B1FinBench
Integrating B1FinBench with internal accounting systems
Drawing on Russian and international best practice to research market prices for reinsurance transactions

TP audits

Applying simulation techniques to assess the client’s audit readiness
Providing support during audits and lawsuits
Assisting clients with advanced pricing agreements (APA) and mutual agreement procedures (МАР)

Challenges specific to a particular segment of the financial services sector:

Banking and capital markets

Intra-group financial transactions and transactions with financial instruments:
- There are multiple similar transactions for different activities
- Applying special TP methods to these transactions is technically challenging and questionable
- Market pricing of these transactions, if done manually, can therefore be highly labor-intensive
Investment banking and global capital markets
- Highly integrated business involving several MNE members performing functions in many jurisdictions
- Revenue or profit split methods are commonly applied in international TP practice, while methods used in Russia are different. This leads to an asymmetry between TP models, which may result in tax inefficiencies
- TP risks should be assessed in combination with other risks (permanent establishment, tax residence, VAT, unjustified tax benefit, regulatory, etc.)

Insurance

Intra-group insurance and reinsurance transactions are unique and highly complex
Captive insurance is an area all its own from a TP perspective
Brokerage transactions are a highly integrated business involving several MNE members performing functions in many jurisdictions. Profit split methods are commonly applied in international TP practice, while methods used in Russia are different. This leads to an asymmetry between TP models, which may result in tax inefficiencies

Investment funds and private wealth and asset management firms

An intra-group agreement is for investment consulting, rather than asset management services
Value chain analysis, asset management models and key value drivers are important issues that are often overlooked
Functions performed are classified as routine (passive management)
Pricing of services based on the Cost Plus Method – Comparable Profits Method