Headline Verdana Bold: Operationalizing Transfer Pricing From Theory To Practice

Headline Verdana Bold
Operationalizing Transfer Pricing

From Theory to Practice
Deloitte Belgium, 16 May 2017
Operationalizing Transfer Pricing From Theory to Practice
Agenda
Topic Content Presenters Timing
Introduction • Concepts & Framework Thierry Chaumantin 3:00 p.m. – 3:15 p.m.
Session 1: Implementing a TP • Manage E2E Cycle Jeroen Lemmens 3:15 p.m. – 4:00 p.m.
Policy • Structure operations
Session 2: Addressing Common • Indirect Tax Liesbet Nevelsteen 4:00 p.m. – 4:40 p.m.
Challenges • Management Reporting Thierry Chaumantin
• System Data Gaps
Coffee Break (20 min)
Session 3: Case study: Applying • Scenario Thierry Chaumantin 5:00 p.m. – 5:50 p.m.
Technology to manage E2E • Tool Demo Delphine Maeckelberghe
Process for Transfer Pricing on
Goods
Conclusion • Key Messages Jeroen Lemmens 5:50 p.m. – 6.00 p.m.

• Next Steps Liesbet Nevelsteen
Reception
© 2017 Deloitte Belgium 2

Introduction

Transfer Pricing
Some Concepts often misunderstood by Business Finance Teams
Arm’s
Length
Mark-up
True-up
VAT
Man

The Building Blocks
1. Manage E2E TP life cycle 2. Structure TP operations 3. Address common challenges
Business
model
Planning /
Defend Ex-ante
People & Organization Indirect Tax
documentation
(Ex-post) TP Life TP Policy & Process Management Reporting

Documentation Cycle procedures
Data & Technology System Data Gaps

Control Calculate
Plan Process
Operate
Defend

Traditional Transfer Pricing
Documentation Focused
 I/C flow
Business  TP policy
model  TP benchmarks
 TP tax audit
 I/C agreement
Planning /
Defend Ex-ante
documentation
 TP local file
(Ex-post) TP Life TP
 TP master file Documentation Cycle procedures  Guidelines
 CbCR  Operating procedure
 Others
Plan
Black boxes
Defend

Operationalized Transfer Pricing
Manage the Numbers: Calculate, Process & Control
Business
model
Planning /
Defend Ex-ante
documentation
Control Calculate Specific

“know how”
Plan required
Process
Operate
Defend

Session 1
Implementing a TP Policy
Manage E2E TP Cycle &
structure Operations

Manage the E2E TP Life Cycle
Business
model
Planning /
Defend Ex-ante People & Organization Indirect Tax
documentation
(Ex-post) TP Life TP Policy & Process Management Reporting


Control Calculate
Plan Process
Operate
Defend

Manage the TP Life Cycle
“Plan” Phase – Check List
TP
Manager
Business  I/C flows classification

model  I/C agreements
Planning /  Valid TP benchmarks

Defend Ex-ante  Actionable TP procedures
documentation  Procedure to identify change in
business model
Control Calculate
Process
Plan
Operate
Defend

Manage the TP Life Cycle
“Defend” Phase – Check List
TP
Manager
 Ex-post documentation
available Business
model
 Alignment between ex-
post and ex-ante
Planning /
documentation Defend Ex-ante
 Consistency between ex- documentation
post documentation of
different countries
Control Calculate
Process
Plan
Operate
Defend
TP Life Cycle
“Operate” Phase – Check List
TP
Manager
Business
model
Planning /
Defend Ex-ante
documentation
Control Calculate
 Effective tools to
calculate TP on goods
Process  Effective tools to calculate
Plan TP on services
 Adequate I/C invoice process
Operate
 Approach to handle I/C price
correction
Defend

TP Life Cycle – Preliminary Assessment
Poll Survey
1 I have a very accurate overview of all material intercompany flows in my supply chain.
2 There are effective internal procedures in place to rapidly detect any new intercompany flow that occurs during the fiscal year.
3 Each material intercompany flow can be easily referenced back to an up-to-date and valid TP Benchmark study (i.e. accepted during a tax audit).
4 Each material intercompany flow can be easily referenced back to an up-to-date and valid intercompany agreement (i.e. accepted during a tax audit).
For each material intercompany flow, there is an effective internal procedure to check whether the activities performed by the related parties as described in the
5
intercompany agreement match the ones used to perform the TP Benchmark study.
6 There is an annual review process to check whether existing intercompany agreements are still consistent with the way the supply chain operates.
There is a TP policy that describes how the transfer prices need to be calculated for each intercompany transaction in order to meet arm’s length principles
7
requirements.
If it exists, the TP policy is rigorously followed in practice. More specifically, the setting of transfer prices is never the outcome of internal negotiations between the
8
managers of the related parties.
The way the transfer prices on tangible goods are set up do not have any impact on the performance bonuses of the local sales teams and/or manufacturing teams;
9
more specifically, for the employees of a legal entity with a routine margin function (i.e. limited risk distributor, contract manufacturer).
10 There is an annual review process to check whether the TP policy is consistent with the way the supply chain operates.
11 The budget numbers are used to calculate transfer prices on tangible goods that need to be applied for the next fiscal year.
There is a process to regularly calculate the correct transfer prices on tangible goods based on YTD actuals and the forecasts for the remainder of the year. These
12
recalculated transfer prices are subsequently updated in the ERP.
For legal entities with several functions (e.g. distribution and manufacturing), there is an easy mechanism to segment the entity EBIT by function so that the actual
13
profit margin each function can be monitored separately.
14 Actual YTD EBIT segmented by function can easily be obtained on a quarterly basis both in management GAAP (IFRS) and in local GAAP.
15 Pro-active updates of transfer prices are regularly performed during the fiscal year to avoid large year-end TP true-up adjustments.
16 The allocation keys used for calculating intercompany recharge of services are well documented.
The types of evidence needed to substantiate whether a given intercompany service has been actually performed, have been defined. The related supporting
17
documentation is archived so that it can be easily retrieved during a tax audit.
There is a well-defined procedure to identify which cost components are to be included or excluded (shareholder costs) from the cost base of intercompany service
18
recharges.
19 The VAT treatment of all intercompany invoices (goods, services) has been reviewed and signed-off by the Indirect Tax team.
The Indirect Tax impact (customs and VAT) of TP true-up invoices has been evaluated and potential negative consequences (e.g. custom fees & duties exposure,
20
Intrastat reporting) are mitigated.
The way TP true-ups are implemented (credit note/debit note vs marketing fees allocation) between related parties is consistent with the roles & responsibilities
21
described in the related intercompany agreement.
22 The VAT treatment and VAT compliance of TP true-up invoices have been reviewed and signed off by the Indirect Tax team.
23 The way TP true-ups are booked, does not affect the business units’ Management Reporting (i.e. TP true-ups are always booked “below the line”).
The financial reports required for local TP documentation (e.g. EBIT segmented by function, amount of intercompany sales & purchases by transaction type and
24
counterpart) can be easily produced from my company’s ERP/financial systems.
There is an annual review process to check whether the financial data included in the local TP documentation is consistent with the TP Benchmark studies and the TP
25
policy.

TP Life Cycle – Preliminary Assessment result
Plan
Business
model
61%
Percentage of those who think that there
are no effective internal procedures in
place to rapidly detect any new
intercompany flow that occurs during the
fiscal year.
Ex-ante
documentation
78%
Percentage of those who think that it is
not easy to reference back the material
intercompany flow to an up-to-date and
valid TP Benchmark study (i.e. accepted
during a tax audit).
TP
procedures
Percentage of those who think there is no proper

annual review process to check whether the TP
policy is consistent with the way the supply chain
operates.
74%
Operate
Calculate
61%
Percentage of those who are not sure
whether that the transfer prices on
tangible goods for the next fiscal year are
based on the budget numbers.
Process
50%
Percentage of those who think that the
Indirect Tax impact of TP true-up invoices
has not been evaluated, nor that the
potential negative consequences (e.g.
custom fees & duties exposure, Intrastat
reporting) are being mitigated.
Control
Percentage of those who find it difficult to obtain

the actual YTD EBIT segmented by function on a
quarterly basis both in management GAAP (IFRS)
and in local GAAP.
83%
Defend
(Ex-post)
Documentation
78%
Percentage of those who do not think
that the financial reports required for
local TP documentation can be easily
produced.
(Ex-post)
Documentation
56%
Percentage of those who are not sure that
there is an annual review process to check
whether the financial data included in the
local TP documentation is consistent with
the TP Benchmark studies and the TP
policy.

Structure TP Operations
Business
model
Planning /
Defend Ex-ante
documentation People & Organization Indirect Tax
(Ex-post) TP Policy & Process

TP Life
procedures
Management Reporting
Documentation Cycle

Control Calculate
Plan
Process
Operate
Defend

TP Governance People & Organization
Identify Gaps in Roles & Responsibilities

Policy & Process
(Illustration)
Data & Technology
Ex-ante TP Ex-post
Calculate Process Control
documentation procedures documentation
TP Manager
  
FP&A Finance
 
IT

SSC

Indirect Tax
 

TP Procedures People & Organization
From generic TP Guidelines to Standard

Policy & Process
Operating Procedures (SOPs)
Data & Technology
How should the TP procedure be

How is a TP procedure usually
written to be operational: task
structured (if it exists)?
description & scheduling
 Statement of intent in terms of TP Goods – How To:

compliance
 Use Budget & Forecast numbers
 Key considerations in terms of I/C
flows  Segment P&L
 PLI (Profit Level Indicator) to use for  Calculate TP

key flows  Update price in ERP
 Who to contact for new I/C flows  Generate & book TP true-up
Service – How To:
 Determine cost base & cost

components (shareholder, pass-
Not an operational document through and conversion)
for Finance/SSC
 Collect and apply allocation Keys
 Generate & book VAT invoice

TP Delivery People & Organization
Aligning Data Flows with FP&A Cycle Policy & Process
Data & Technology
FP&A
Finance Cycle
Transfer price to be applied to each

Budget 1 Calculate
I/C flow
I/C invoice according to calculated

5 Process
transfer price
Forecasts
4 Profit Level (PLI) of routine

Control
functions: monitoring & adjusting
Actuals

Maturity Level Assessment Score Card
(Illustration)
Ex-ante TP Ex-post
Calculate Process Control
documentation procedures documentation
People & Organization
Policy & Process
Data & Technology
Strong
Weak

Session 2
Address Common Challenges

Indirect Tax, Management
Reporting and System Data
Gaps

Address Common Challenges
Business
model
Planning /
Defend Ex-ante
documentation People & Organization Indirect Tax
(Ex-post) TP Policy & Process

TP Life
procedures
Management Reporting
Documentation Cycle

Control Calculate
Plan
Process
Operate
Defend

Transfer Pricing and Indirect Tax Indirect Tax
Two Different Worldviews Mgt. Reporting
Data Gaps
Transfer Pricing Impact on Indirect Tax
• Profit allocation • Supply of goods & services

• Routine margin • Place of supply
• Remuneration of intangibles • Supply value
Routine
margin
Upward
adjustment
Obtaining the ”right profit” based Applying the “right tax” based on
on functions, assets and risk transaction type

Typical Indirect Tax Challenge – Case 1
TP True-Up Upward Adjustment and Credit Note
Entrepreneur Distributor (LRD)
I/C Goods supply

Prices used for purchase of IC goods
LRD remuneration is too LOW
are too HIGH
Routine
margin }
Upward
adjustment
Decrease inventory valuation & COGS
Take no action Issue credit note Take no action Issue credit note
CIT exposure for LRD Import fees & duties
leakage
Intrastat reporting
Reference to original
© 2017 Deloitte Belgium invoices 25
Typical Indirect Tax Challenge – Case 2
TP True-Up Downward Adjustment and Debit Note
I/C Goods supply

Prices used for purchase of I/C goods
LRD remuneration is too HIGH
are too LOW
Routine
}
margin Downward
adjustment
Increase inventory valuation & COGS
Take no action Issue debit note Take no action Issue debit note
CIT exposure for (Except in some countries Import fees & duties
Entrepreneur where downward exposure
adjustments are not CIT
Intrastat reporting
deductible leading to
double taxation) Reference to original
© 2017 Deloitte Belgium invoices 26
Typical Indirect Tax Challenge -3
TP True-Ups as Marketing/Sales Support Service Allocation
Main Supply Correction
Entrepreneur Distributor (LRD) Entrepreneur Distributor (LRD)
I/C Goods I/C Services
Case 1 LRD needs to be remunerated for

LRD remuneration is too LOW its local marketing support
Routine Buyer Seller

margin
}
Upward
adjustment
Local marketing
support
Case 2 Entrepreneur needs to be

LRD remuneration is too HIGH remunerated for its sales support
Routine
} Seller Buyer
Downward
margin adjustment
Sales support

TP True-Ups as Marketing/Sales Support Service Allocation
Difference in Transfer Pricing & Indirect Tax Reasoning
Transfer Pricing Indirect Tax

Reasoning Reasoning
Transfer Pricing
• LRD guaranteed routine margin is
Reasoning • Qualification of supply: Supply
based on mutual services performed provider (Entrepreneur vs. LRD) can
by both the LRD and Entrepreneur alternate from one period to the
other
• Distribution agreement describes
services performed by LRD & • Supply value: Supply value can
Entrepreneur and mutual obligations vary based on LRD profit margin
• Distribution agreement is aligned • Place of supply: Local marketing

with facts (i.e. headcounts in LRD service from LRD can trigger non-
and Entrepreneur performing recoverable foreign VAT for the
services mentioned) Entrepreneur in some countries
Indirect Tax Exposure

Resolving Transfer Price and Indirect Tax Requirements Conflicts
TP True-Ups – Pro Active Price Adjustments (1)
1 Set up transfer price

Main Supply
2 Calculate Actuals YTD margin
3 Extrapolate year-end margin
I/C Goods
Routine
Routine
margin
TP1 1 margin }
3
}
Q1 Q2 Q3 Q4

4 Calculate upward/downward
adjustment on extrapolated year-end
Main Supply margins
Entrepreneur Distributor (LRD) 5 Calculate new transfer price for

upcoming quarters
6 Set up new transfer prices

I/C Goods
5
Routine
margin
TP1 TP2 } 4
6
TP2
}
}
Q1 Q2 Q3 Q4

Key benefits Points of attention

• Steer Year-End YTD margins with • Transfer Price calculation
transfer prices updated on a Increase frequency to avoid big swing
periodical basis from one period to another
• Aligned with TP requirements • Simulation tool to manage:
(reach routine margin)
− Volume, product mix, overhead
• Aligned with Indirect Tax (VAT, cost allocation
Customs requirements): consistent − Constraints (e.g. Transfer
supply of goods Pricing above product cost,
regulatory price,...)
− As If scenarios (e.g. stock
increase, stock duration,…)
• Automated interface to ERP to
manage regular price updates

Transfer Pricing and Management Reporting Indirect Tax
Two Different Worldviews Mgt. Reporting
Data Gaps
Transfer Pricing Management Reporting
• Legal entity • Product line / Business unit

• Routine vs. entrepreneur • End to End margin
• Controlling transfer price • Eliminating transfer price
Manufacturer Distributor Manufacturer Distributor
Costs Revenues
Transfer price Supply chain
Routine
margin E2E margin
Residual
profit
“Profit allocation based on value

”Optimizing E2E margin”
drivers”
When Transfer Prices & Management Reporting Conflict
Inventory Valuation/COGS Accounting – Challenge Example
Manufacturer Distributor
Costs (*) Revenues
Transfer price
{
• Standard • Standard
• Material
Standard (actual) (actual)
• Labor cost cost
(actual)
cost • Machine • TP margin • E2E margin
(*) simplified: real

case also contains
packaging and
transportation costs &
overhead

Distributor COGS Distributor COGS
Standard
Transfer
(actual)
price
cost

When Transfer Prices & Management Reporting Conflicts
Inventory Valuation/COGS Accounting – Solution Example
1 Booking inventory at standard cost, expensing TP margin 2 COGS booked at standard cost
Inventory (B/S) IC AR/AP (B/S) Inventory (B/S)
Standard Transfer Standard
cost Price cost
100 € 110 € 100 €
PPV (*) (P&L) COGS

TP margin Standard
cost
10 €
100 €
(*) PPV = Purchase Price Variance
2 Manage COGS account roll-up: Transfer Pricing vs. Management Reporting

COGS & PPV COGS (*)
Standard cost Standard cost

100 € 100 €
TP margin
10 € (*) PPV is left “Below the Line” in the
Management Roll-Up
3 Re-Classify PPV to inventory for unsold stock at year-end for statutory reporting

Transfer Pricing and Management Reporting
Key Principles – TP Components should be booked Below The Line
Focuses on “Above the line”, i.e.

Ensure that all TP components are
what can be managed by the
“Below the line”
Business Finance managers
Sales Above the line: should

(COGS) not contain any TP
• Dedicated TP GL account or sub- component
(Overhead)
account in management GAAP
• Set up management vs. statutory Management OP
accounting roll-up (I/C services) Below the Line: will be

eliminated during I/C
• Configuration of BI management (I/C TP components)
elimination
and statutory report – dual GAAP (I/C TP true-ups)
Statutory OP

Transfer Pricing & System Data Gaps Indirect Tax
Common Issues – Data Mgt. Reporting
Data Gaps
01 04
Budgets are prepared using If EBIT Budget & Forecast can
Management Reporting be linked to a legal entity, there
dimensions but not legal entity is no automatic segmentation
dimensions: by function
• Business Units
• Product Group
• Market /Customer Group
02 05
Forecasts do not usually Budget, Forecast and Quarterly
contain volume information Actuals are usually in
(only monetary equivalent) management GAAP (IFRS, US
GAAP) vs. local GAAP
03
Budget & Forecast are
externally focused and do
usually not contain
• I/C margin on tangible
goods
• I/C recharge of services

Transfer Pricing & System Data Gaps
Common Issues – Technology
01 03
Challenges in getting adequate Challenges in updating ERP
reports for calculation purposes back
• BI reports: gross margin by • Pricing procedures/tables
product and EBIT reports update
• GL account analysis: manual • I/C invoice processing (TP
GL journals/postings – PPV, true-up)
inventory valuation
02
Complex calculations in Excel
spreadsheets to manage
• Mapping
• Reconciliation
• Segmentation
• Simulation
• Output reports

Transfer Pricing & System Data Gaps
Common Solutions
Long Term
Data
Part of ERP/EPM upgrade (S/4 HANA)
Short & Medium Term • Entity dimension
• I/C service recharge
Data Technology
• Fully loaded entity P&L
Rules & formulas Pricing & modelling tool
• Extrapolation IFRS to Stat adj. • Benefit of Excel in terms of
flexibility and user-friendliness
• Extrapolating volume forecast
• Additional functionality
• EBIT segmentation by product
SKU − Audit trail - update
− Server storage
− Workflow

Session 3
Case Study
Applying Technology to manage
E2E Process for Transfer Pricing
on Goods

Demo Case
Luminova: Manufacturer of Lighting Systems
• HQ based in Geneva, Switzerland
• 3 sales organizations in Belgium, the Netherlands and France
• 2 production plants: Belgium and France
• 1 Shared Service Center in Czech Republic
• Luminova has a Swiss principal company
• Headcount: 320 employees
NL10
Sales Organization
CZ30
Sales Organization & Plant BE10
Shared Service Center (SSC)
Principal
FR10
CH10

Demo Case
Luminova – Organizational Structure
Group
Legal entities Luminova
Functions
BE10 FR10 NL10 CZ30 CH10
Manuf. Distr. Manuf. Distr. Manuf. SSC Principal

Demo Case
Luminova – TP Pricing Model Structure
Clients
Goods flow
Goods flow Sells at C
Invoice flow
Manufacturing Sells at A Sells at B

Principal (HQ) Distributing company
Company Invoice flow Invoice flow
OM% Sales
margin
Principal Principal
margin Margin
Manuf. Manuf. Manuf. C
NCP%
margin margin B margin
Budget A Budget Budget
Standard Standard Standard
cost cost cost
Sale Price composition

Demo Case
Luminova – TP Pricing Model Assumptions
TP benchmarking methods
TNMM method is used with the following
PLIs: NCP for manufacturers and OM for
distributors.
ERP TP setup Production costs & inventory

Manufacturer is a cost plus on standard For demo purposes, we have
cost and distributor resale minus on list assumed that
price. • the labor costs & the cost of raw
materials are consistent between
countries
• the sales volume will be equal to
the production volume.

Demo Script
Luminova – Data Flow
ACTUALS BUDGET Q1 FORECAST
Step 0 Step 1 Step 6
Perform
Actuals FY16 load top-down Sales Actuals load first three
budgeting months FY17
Step 2 Step 7
Review
top-down budget and Bottom-up Sales
perform bottom-up forecast
Sales budgeting
Step 3 Step 8
User legend
Budget production costs Copy OPEX and COGS
Sales Manager budget to forecast
and calculate COGS
Supply Chain Manager
Finance controller Step 4 Step 9
Tax Manager
Budget
Transfer price
OPEX, IC service
calculation for budget &
recharge & Allocation of
review of financial
OPEX
statements
Step 5
Transfer price
calculation for budget & Maintenance
review of financial of user roles, access
statements rights and master data
changes
* Idem as Q1 Forecast steps

Operational TP Tool Demo
Solution built in Anaplan

Transfer Pricing Modelling in Anaplan
Key Benefits

Conclusion

Conclusion
Key Messages
Manage the full E2E TP Cycle

Not only your transfer pricing documentation
Write a detailed transfer pricing policy

A standard operating procedure for Finance, SSC
and the IT team, including Indirect Tax aspect
Apply technology
Use tools to integrate transfer pricing with the FP&A
finance cycle. Tailored tools can be easily built (e.g.
Anaplan)

Conclusion
Next Steps
1
Complete a detailed “Maturity
Level Assessment”
Where are the gaps?
2
Make a business case for an
operational transfer pricing tool
E2E TP process cannot be effectively
managed without technology

How To Get Started
Deloitte’s Quick Start Operational TP Lab
Business
model
Planning /
Defend Ex-ante
documentation
 One day workshop

TP
(Ex-post)
Documentation
TP Life
Cycle procedures  All key operational TP stakeholders
 Maturity assessment (Risks & Opportunities)
Control Calculate
 Defining the end state
Plan
Operate
Process
 Drafting an action plan
Defend

Contacts

Contacts
Jeroen Lemmens Liesbet Nevelsteen

Partner Partner
Company: Deloitte Company: Deloitte
Office: Zaventem Office: Zaventem
Telephone: +32 2 600 69 82 Telephone: +32 2 600 66 53
E-mail: jlemmens@deloitte.com E-mail: lnevelsteen@deloitte.com
Thierry Chaumantin Jérôme Libioul

Senior Manager Manager
Company: Deloitte Company: Deloitte
Office: Zaventem Office: Zaventem
Telephone: +32 2 600 66 08 Telephone: +32 2 749 56 39
E-mail: tchaumantin@deloitte.com E-mail: jlibioul@deloitte.com

Appendix

Introduction to Anaplan
Company and product key facts

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by
guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member
firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not
provide services to clients. Please see www.deloitte.com/about for a more detailed description of DTTL and its
member firms.
Deloitte provides audit, tax and legal, consulting, and financial advisory services to public and private clients
spanning multiple industries. With a globally connected network of member firms in more than 150 countries,
Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to
address their most complex business challenges. Deloitte has in the region of 225,000 professionals, all
committed to becoming the standard of excellence.
This publication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member
firms, or their related entities (collectively, the “Deloitte Network”) is, by means of this publication, rendering
professional advice or services. Before making any decision or taking any action that may affect your finances
or your business, you should consult a qualified professional adviser. No entity in the Deloitte Network shall
be responsible for any loss whatsoever sustained by any person who relies on this publication.
© 2017 Deloitte Belgium

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Operationalizing Transfer Pricing

Topic Content Presenters Timing

Coffee Break (20 min)

Conclusion • Key Messages Jeroen Lemmens 5:50 p.m. – 6.00 p.m.

© 2017 Deloitte Belgium 2

© 2017 Deloitte Belgium 3

© 2017 Deloitte Belgium 4

1. Manage E2E TP life cycle 2. Structure TP operations 3. Address common challenges

(Ex-post) TP Life TP Policy & Process Management Reporting

Data & Technology System Data Gaps

© 2017 Deloitte Belgium 5

© 2017 Deloitte Belgium 6

Control Calculate Specific

© 2017 Deloitte Belgium 7

© 2017 Deloitte Belgium 8

1. Manage E2E TP life cycle 2. Structure TP operations 3. Address common challenges

(Ex-post) TP Life TP Policy & Process Management Reporting

Data & Technology System Data Gaps

© 2017 Deloitte Belgium 9

Business  I/C flows classification

Planning /  Valid TP benchmarks

© 2017 Deloitte Belgium 10

© 2017 Deloitte Belgium 12

© 2017 Deloitte Belgium 13

Percentage of those who think there is no proper

Percentage of those who find it difficult to obtain

© 2017 Deloitte Belgium 16

1. Manage E2E TP life cycle 2. Structure TP operations 3. Address common challenges

(Ex-post) TP Policy & Process

Data & Technology System Data Gaps

© 2017 Deloitte Belgium 17

Identify Gaps in Roles & Responsibilities

© 2017 Deloitte Belgium 18

From generic TP Guidelines to Standard

How should the TP procedure be

 Statement of intent in terms of TP Goods – How To:

 PLI (Profit Level Indicator) to use for  Calculate TP

Service – How To:

 Determine cost base & cost

 Generate & book VAT invoice

© 2017 Deloitte Belgium 19

Aligning Data Flows with FP&A Cycle Policy & Process

Data & Technology

Transfer price to be applied to each

I/C invoice according to calculated

4 Profit Level (PLI) of routine

© 2017 Deloitte Belgium 20

People & Organization

Policy & Process

Data & Technology

© 2017 Deloitte Belgium 21

Address Common Challenges

© 2017 Deloitte Belgium 22

1. Manage E2E TP life cycle 2. Structure TP operations 3. Address common challenges

(Ex-post) TP Policy & Process

Data & Technology System Data Gaps

© 2017 Deloitte Belgium 23

Two Different Worldviews Mgt. Reporting

Transfer Pricing Impact on Indirect Tax

• Profit allocation • Supply of goods & services

© 2017 Deloitte Belgium 24

I/C Goods supply