Bissendorf/Osnabrück. To reduce the risks involved in transfer pricing, the international tax consultancy and accounting firm, Ernst & Young (EY), have entered into a collaboration with nicetec, the medium sized software manufacturer based in Bissendorf, Osnabrück, which synergises their tax and IT expertise. The aim of the collaboration is the transparent, legally compliant and audit-proof processing of intragroup cross-border transactions affcted by internationally operating enterprises. In processing such transactions, these enterprises must comply with tax requirements so as not to incur double taxation, unnecessary interest or even fines, as this topic has meanwhile been identified as a focal point in audits by the tax authorities.
Intercompany Service Charging with insighTPro
By virtue of the collaboration with nicetec, the transfer pricing specialists at EY are now in a position to offer their clients a tool with which intragroup services can, as regards to transfer pricing considerations, be settled efficiently, transparently and in perfect compliance with tax laws. The IT expertise is provided by nicetec in the form of its insighTPro software and EY provides the specialist tax knowledge. Alongside gains in efficiency, the benefit for EY's clients lies above all in the considerable reduction of risk related to transfer pricing. All group companies participating in service transactions - both, those providing and those receiving services - benefit from the tool. In addition, from a control and management perspective, for example, it is possible to significantly increase transparency in relation to internal costs, which can uncover potential savings or miscalculations in all areas.
Extremely efficient Transfer Pricing Tool
„With nicetec's software, we are closing a gap in the range of consultancy services that we offer. Many clients have asked us how they can account for existing or new intragroup services transparently and with legal certainty. Often it is a big challenge to evidence the benefit to the recipient and properly record all relevant costs to the service provider. Of course, it is also possible to use Excel and Word documents, but this is extremely laborious, prone to errors and difficult to reproduce", says Dr. Frank Schöneborn, partner at EY. "We now have a sophisticated tool for this prupose that is extremely efficient in terms of its range of functions and that can be fleibly used and scaled." The tax knowhow is contributed by EY specialists and translated into "IT-language". Therefore a bridge is created between the very different specialist language used by tax advisers and IT experts.
Continuous flow of information and data
The software has standard interfaces which can import all relevant data from, and export all relevant data to, the ERP systems belonging to an enterprise.
"It is envisaged that we will further optimise the tool with regard to specific transfer pricing requirements in collaboration with EY in the future", says nicetec CEO Ralf Meyer. "In doing so, we are also relying on EY's extensive international experience and transfer pricing knowhow. We are proud that our software has enabled us to win a leading consultancy like EY as a partner."
Using nicetec's highly specialised insighTPro software, it is possible to continously represent value and information flows relating to the settlement of intragroup crossborder services. Via workflows, foreign group companies can, for example, order a service in the head office that was transparently calculated through quantity and costs centres in a service catalogue at the same time as being compliantly calculated with regard to tax. The great benefit of the insighTPro software is that all parameters are absolutely transparent, processes can be standardised and carried out with a high level of automation and the results can be reproduced years later in the event of a tax audit.
Tax authorities focus on Transfer Pricing in audits
Due to the aggressive tax organisation of some corporations, in recent years the topic of transfer pricing has been brought into the spotlight in public discussions. The interest of the tax Autorities has thus been steered towards transfer pricing: "The international tax autorities have identified the topic themselves and made it a focal point in audits. For a wide variety of reasons, a significant surplus is often achieved when the autorities address transfer pricing in their audits - in most cases after a relatively short audit period." Alongside method selection, benchmark studies and other weaknesses relating to documentation requirements, there are many flaws in operational calculation and settlement processes that are usally undertaken outside tax departments.
Intercompany Service Charging & Compliance
A very common transaction in intercompany dealings is the settlement of intragroup services. If services are performed in the head office for foreign subsidiaries, the question immediately arises whether and how, and by whom and when, they should be invoiced. The intragroup service provider must differentiate stewardship expenses and the user must prove that it received services in detail, so that the tax deduction is not refused. Therefore the partiular challenge is to determine and monitor the prices of intragroup services in day-to-day operations. Responsibilities are too often unclear or processes inconsistent or manual errors have been made or there is simply a lack of support by adequate IT systems. The potential for optimisation is considerable, the benefit great: avoidance of double taxation, interest and penalties and certainty of tax compliance coupled with gains in efficiency and cost transparency.
Founded in 1998 with its head office in Bissendorf, nicetec GmbH is a market leader in the field of flexible software solutions for IT financial management. The technology business applies its software products, servicing, consultancy and development services for companies throughout the world. nicetec is also a leader in the area of intragroup transfer pricing and co-operates with the international tax consultancy and accounting firm, Ernst & Young (EY).
About Ernst & Young
EY operates in the areas of auditing, tax advice, transaction advise and risk and management advice and advises internationally operating corporations and small and medium sized German businesses in many different branches and sectors of industry, as well as supranational organisations and federal, state and municipal governments.
EY is a member of the global group of Ernst & Young companies. Every EY member is an independent legal entity.