Transfer pricing systems of multinational groups require statements on the arm’s length nature of transfer pricing and income allocation.
The GTP® Models on such arm’s length assessment endeavor support the transfer pricing manager in the task of defending the income allocation of the group. The GTP® Models make use of accounting data available from the group’s data systems (e.g., ERP-data), supplemented by additional internal or external information. The GTP® Models result in the necessary arm’s length statements of transfer pricing and income allocations with reference to the arm’s length principal and other provisions of the international tax regimes.
Based on the GTP® Triad of the term “Transfer Pricing”, the business economics perspective of product and service deliveries are linked with the tax-world transfer pricing models and the inherent arm’s length information necessary. We refer to the OECD Transfer Pricing Methods, as proposed by the OECD Transfer Pricing Guidelines towards local tax jurisdictions and/or tax authorities.
The GTP® Models of the arm’s length assessment analysis are established with third-party data which are retrieved from various sources of databases and benchmarking approaches. For example, such arm’s length tests are based on profit level indicators, cost ratios, royalty rates, interest rates, and monetary price data. Other types of ratios and information are also deployed if applicable.
One of the key elements of such GTP® Models is the characterization of the function and risk pattern of the tested party with regard to the terminology “routine”, “local entrepreneur” and “strategic entrepreneur”.