• Support for development of transfer pricing policy

Support for development of transfer pricing policy

A transfer pricing policy stipulates a policy for a transaction price (transfer pricing) with related parties and generally consists of (1) determining price setting; (2) deciding transfer pricing method to determine if the transaction price is arm's lengths price; and (3) verifying transaction price.

Under transfer pricing regulation, the transaction price with related parties must be an arm's length price (the price that two unrelated parties would reach under the same conditions) and it is necessary to file a tax return using the said arm's length price and prepare documents containing the results of transaction price verification (transfer pricing documentation).

In order to manage transfer pricing risks, it will be efficient to develop a transfer pricing policy which matches the actual conditions of corporate groups to the transfer pricing regulation in advance. Related parties then conduct daily transactions in compliance with the said policy.

In order to develop a transfer pricing policy which matches with the actual conditions of corporate groups and transfer pricing regulations, it is necessary to properly understand transfer pricing regulations both in Japan and countries where parties related to transactions are located, and reflect it in a transfer pricing policy to be developed. It is also necessary to accurately understand the current conditions, transaction details, business strategies, and other details of companies.

For developing a transfer pricing policy, we are able to provide support our clients by cooperating with BDO International member offices.