Stay in the driver’s seat! Steering through uncertain “post BEPS times” requires a proactive controlling of transfer pricing structures to comply with the arm’s length principle and reduce the own risk positions.
From a civil law perspective, multinnational firms are in fact autonomous in the determination of intercompany prices. However, this autonomy is factually restricted by tax law due to the consideration of the arm’s length principle. Saying this, it can be beneficiary for multinational firms to consider the arm’s length principle as well as value contributions already during the price setting process.
At the same time, transfer pricing should also consider controlling objectives for purposes of business management. Transfer pricing fulfills various functions for controlling purposes depending on the given objectives: coordination, performance measurement as well as motivation.
Dealing with transfer prices and the arm’s length principle proactively as well as the coordination of the price setting process among the various departments is essential for a mutual understanding of transfer pricing within a multinational firm. This ensures the development of joint and target-oriented solutions for transfer pricing topics although a full standardisation of transfer prices is not always feasible due to opposing objectives.