Adopting new technology often implies certain challenges and uncovers issues that could have previously remained unnoticed. Aibidia’s data-driven approach helps to detect those naturally during the onboarding process when a taxpayer’s TP data is transferred to the platform and they start taking it to use.
Reflecting on our experience with customers who decided to digitalize their transfer pricing documentation process with the help of the Aibidia platform, the following findings were among the most common.
As stipulated in the OECD Guidelines, the most recent comparable data should be used in testing arm’s length principle compliance. In practice, benchmarking studies are often not updated regularly or may even not exist for certain transactions. Following the clearly designed and logical process of documenting economic analysis in the Aibidia platform, such cases can be easily identified and addressed. In case a previous benchmarking study can still be updated, roll-forward of financial data can be performed by Aibidia. Where the previous benchmark is too old, and a new search is required (or where no previous benchmark is available), Aibidia can prepare a new study from scratch.
Another common issue is the lack of up-to-date legal agreements for controlled transactions. In some cases, available legal agreements date back years, and the terms outlined in those do not reflect the actual functions and risks of the parties anymore. Written agreements may also not be available where historically, the terms of transactions have been agreed otherwise. Noticing this helps our customers to acknowledge and address the issue by revising outdated agreements, preparing annexes to those, or initiating the process of composing new ones.
We have also encountered instances where even at the headquarters level, there needed to be more understanding regarding the TP policies due to a decentralized approach to preparing TP documentation. For example, unaligned TP policies and legacy set-ups used in parallel with the new ones are discovered during the transition to a digitalized TP process. Working through such issues helps taxpayers understand and control their TP policies and improve compliance. Aibidia can, if needed, provide additional expert services or refer a customer to a partner consultancy to help them get their TP set-up streamlined.
To comply in every jurisdiction, all legal entities should have a Local file (when meeting respective thresholds). In cases where only some subsidiaries have Local files and others don’t, the Aibidia platform offers a possibility to benefit from the unique technology when documenting repetitive transactions within the multinational group. In most groups, many pieces of information are repetitive across local files – for example, group and business descriptions, list of competitors, etc. Moreover, if most transactions within the group follow the standard TP policies, preparing a Local file for a previously not covered subsidiary will require minimal time and effort.
One of the most common challenges observed is related to data collection. Scattered data, difficulties with getting information from companies in multiple jurisdictions and from multiple systems, need for a lot of manual processing and checking complicate the TP processes significantly. To assist customers with streamlining data collection and improving the processes, we may engage our data specialists who will work directly with the customers to analyze current steps in data collection, identify pain points, and solve issues by building automation enabling new efficient process customized according to the customer’s needs.
Usually, adopting new TP technology goes hand in hand with assessing existing internal processes related to TP documentation preparation. Transitioning to digital transfer pricing gives customers a chance to improve those by having clearly defined tasks for different roles. In the Aibidia platform, multinationals can have multiple users with different types of access, allowing, for example, users from subsidiaries to input data related to their respective entities without full access to all information, reviewing respective entities’ Local files from the local perspective, etc. It is always a good idea to have a properly documented process in place, with clearly defined roles and responsibilities – it facilitates smooth and timely preparation of TP documentation and ensures full compliance.
During the onboarding process with a customer, we work on finding a suitable solution for each identified issue or challenge. The goal is to get the most out of the technology-based approach and make the TP documentation process as simple and efficient as possible. And an additional benefit of starting using the technology is a “sanity check” of the company’s TP set-up and process.
About the author:
Anna Korobeinikova works as a Digital Transfer Pricing Manager at Aibidia. Anna has over 6 years of experience in transfer pricing, having worked at Big4 consulting companies for more than 5 years. At Aibidia, Anna focuses on assisting customers with the transition from their current TP compliance practice to using the Aibidia TXM platform. Additionally, as part of this transition, Anna takes care of the customers’ benchmarking needs.