Transfer pricing documentation prepared in a timely manner may be advantageous to a company
Many companies postpone preparation of transfer pricing documentation; however, it should be borne in mind that timely documenting of related party transactions may go beyond a simple compliance exercise.
As it is widely known, a timely preparation of transfer pricing documentation at a decent level of professional quality is of a key importance, because it can protect the company from exceptionally high default penalties for non-compliance with the transfer pricing documentation requirements (HUF 2 million per missing documentation, or HUF 4 million per missing documentation in the case of a repeat infringement). Further, any resulting transfer price adjustments may as well affect the financial report data. But it is not the single reason why it is worth preparing the transfer pricing documentation.
From a business perspective, the transfer pricing documentation requirement is not just a necessary evil. By the means of a duly prepared documentation a managing director may gain a deeper understanding of the company’s market position, as the benchmarking study which is an integral part of a transfer pricing documentation demonstrates the competitors’ prices and mark-ups, as well as the financial performance indicators of their business operations.
Additionally, the timely preparation of transfer pricing documentation results also in lower costs. According to the legal regulations in effect taxpayers are obliged to provide on the tax authority’s request any documents or information required during tax audits. In such cases, for reasons of urgency catching up for any missing transfer pricing documents is possible only at considerably higher costs. Besides, we should keep in mind the capacity limits, no matter whether we are going to use the services of an external provider, or an inhouse tax expert. At the end of the day the company will inevitably have to comply with the legal requirements, but the retrospective discharge of obligations always goes with substantial additional costs, and exposes the company to possible tax authority sanctions.
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The transfer pricing specialists of VGD Hungary provide effective assistance in the preparation of transfer pricing documentation at a high professional level and within the prescribed time limit.
Should you have any questions regarding this newsletter, the tax experts of VGD Hungary will be pleased to assist you.
