Deloitte EMEA Transfer Pricing Conference

Alexander Cherinko, leader of Deloitte Ukraine TP practice, acted as the lead presenter on the international breakout session which took place in Frankfurt, Germany from 16 to 19 March, 2015, focused on hot topics in Central and Eastern European (CEE) transfer pricing. Presenting with Alexander were partners from Deloitte offices in Poland, Hungary, Russia and the Czech Republic. 

Participants agreed that transfer is becoming a higher priority for the tax authorities in every CEE country. This concerns both the amount of time and attention devoted to transfer pricing by tax authorities as well as the number of transfer pricing audits they plan to carry out.

Deductibility of management service fees is an area that is often raised at transfer pricing audits. In most CEE countries in order to support the deductibility of the management fees subsidiaries of multinational companies should be able to prove that: (a) management services were actually provided (i.e. existence of proper supporting documentation, etc.), (b) the “benefit” test is passed (the subsidiary really benefited from the services), and (c) that the value of the charge is at arm’s length.

CEE tax authorities also tend to go into deeper details regarding verification of the functional profile described in the TP documentation and start to compare declared profile versus actual.  Conduction of interviews with business personnel to verify that is a standard practice.

Country-by-Country (CbC) reporting, introduced by BEPS, is an issue that the tax authorities are considering very closely.  However, out of all CEE countries only Russia has so far voiced detailed plans for CbC implementation (in 2018 for the 2017 reporting year). CbC reporting is an extended transfer pricing document that foresees extensive disclosure of information by multinational corporations in respect of their subsidiaries across the globe (on a country-by-country basis).