Transfer Pricing

Transfer Pricing

Posts 1-1 of 1
  • Erich Rohland
    Erich Rohland    Premium Member
    The company name is only visible to registered members.
    Tax field audits in practice / Relief for the taxpayer when preparing the transfer pricing documentation
    Electronic Data Access of the Tax Authorities grants far reaching rights to a Tax Field Auditor. Taxpayers must tolerate this and they are suffering from duties to cooperate in tax field audits. What is to be expected from digital audits in future?

    The changes in the Revenue Code (AO) introduced with the Tax Reduction Act of 2000 (StSenkG)* were actually applied in the field audit scheduled for 2002. The following is based on practical experiences from a field audit prepared according to the GDPdU rules and meanwhile completed.

    The reports and printlists that an enterprise has been archiving on data media for years, in order to make individual transactions traceable according to GoB and GoBS, assure that this bulk data can be machine processed for the entire retention period. The GDPdU have not expanded the scope of tax-relevant data and records subject to retention. General ledger account lists, compact journals, individual creditor and debitor items, even warehouse lists and lists of individual costs in the cost calculation, etc. can be processed or edited using Opti.List without information loss. In some ways, the analysis potential is even superior to that of the productive system.

    The information content of the lists is to be seen as a comprehensive tax database. The relevant fields can be extracted and linked from individual lists when the data is imported. The extracted data remains unchanged during this process. Such a database is also an essential prerequisite in order not to have to retain the previously used hardware and software for a later field audit after a system changeover.

    For years now print files have been successfully applied to extract data. It is just this attribute that has made Opti.List the first choice for use in field audits. In lists structured heterogeneously the data has to be broken down into individual information units through several import steps before they can be reintegrated using key terms. It is immaterial whether the lists were archived years before or generate on line. They can still be used as the basis for transfer of data.

    Relief for the taxpayer when preparing the transfer pricing documentation

    The preparation of written documentation for transfer pricing, now required in Germany, is much easier with a transfer price directive that meets all requirements. For example, it must include complete specifications for setting prices**. Annual recurring records as to the appropriateness of supplies or services in the corporate group are unnecessary if the regulations are complied with. It should suffice to demonstrate compliance with the transfer-pricing directive by regular sampling tests with audit software and documentation of the findings. The taxpayer must prepare special records if he intends to deviate from the transfer-pricing directive. Naturally he must review regularly whether the rules in the transfer-pricing directive need to be adapted to other circumstances or improved information.

    * Law of 23.10.2000, BGBl. I 2000, 1433. GDPdU: Base-rules for Access to electronic data and for inspectibility of digital records, German Federal Ministry of Finance (BMF) of 16.7.2001, IV D 2 – S 0316 – 136/01, BStBl I 2001, 415; GoB: Principles of Propper Accounting; GoBS: Principles of Propper Accounting using data Processing systems, BMF of 7.11.1995, BStBl I 1995, 738; AO: Revenue Code / General Tax Code.

    ** On the further mandatory elements of transfer pricing documentation see §§ 4 and 5 GAufzV and BMF of 12.4.2005, BStBl I 2005, 570.

    http://www.gdpdu-wiki.de

    Freundliche Grüße,

    Erich Rohland
    • 22 Apr 2010, 6:02 pm