Transfer Pricing Analytics
As per Department of Revenue Reports, an estimated amount of INR 8 Trillion of tax revenue is locked up in tax litigation in India under various adjudicating authorities. Transfer pricing (TP) is one of the most litigious areas of taxation. The number of TP disputes are rapidly increasing – More than 50% of TP Audits results in adjustments, and the amounts of transfer pricing adjustments made by Income Tax Department every year is close to INR 0.4 trillion. Revenue authorities in many jurisdictions have already started using support of technology in their assessment of transfer pricing. The mandate of country by country reporting disclosures will only create more information to be analysed. A substantial chunk of the TP disputes and demands are on account of issues of comparability (around 43%).
As a Multinational Enterprise (MNE), the critical questions are:
- How do you make sure that the transfer pricing strategies are optimal, efficient & compliant in all jurisdictions that you operate?
- Are your systems & processes capable of retrieving relevant information in the event of a dispute, say after 3 to 5 years?
- How do you administer & monitor TP compliance across the board when pricing, logic and modalities of third party transactions are also dynamic?
- Are you able to find out deviations and address it in a timely manner?
- Are you really ready for an in-depth transfer pricing assessment? Do you have data to support your business case during an assessment?
We at Delfos brings you a very specialised and unique service offering, to better control the transfer pricing function end-to-end. We use advanced technologies and Data Analytics to gather large sets of available data from different internal & external data sources, structure & process the available data to come up with meaningful insights, and visualise the results of analyses with powerful dashboards. In short, our analytics help in improving, enhancing and refining the understanding of certain information which is routinely gathered but usually dumped as unprocessed data stored in large excel files, documents or disparate databases.
We collaborate with leading Transfer Pricing specialists in India who share our data-driven mindset. Where the clients have in-house transfer pricing experts, we work with them. We explicitly withhold from transfer pricing documentation and forming opinions. This is left to the in-house/hired transfer pricing specialists, while we focus on providing insights to data for aiding their decision making.
Transfer Pricing Analytics Services of Delfos involves the
1. Data Gathering & Collection
To start with, we identify the data available for conducting the Analysis. This could be data from the Client’s ERP system, other distinct programs & databases used by the client (like Salesforce for marketing or a payroll system for HR or Version 1 for project management). These provides data points which could be used in transfer pricing policy setting or identifying comparables and drawing insights for new adjustment bases etc. Data could also be external benchmarking data as available. Relevance & Quality of data is considered significant while gathering data for Analytics.
In most organisations, data to support transfer pricing functions are gathered manually from disparate sources and cannot be analysed cohesively. The powerful tools that we use can integrate with & connect to almost all data sources and pull out data automatically from source systems and stored centrally for future use.
2. Analysis & Presentation
This step involves processing & analysing large data sets to derive insights, trends and patterns. In other words, available data is transformed into meaningful pieces of information by splitting, combining, consolidating or interlinking data in innovative ways.
For Transfer Pricing, the above analysis may provide the following results to the client:
- Provide an overview of the level of compliance with Transfer Pricing Policies of the company and visualisations of deviations;
- Identify new bases for comparison between intercompany & third-party transactions which perhaps provides room for further adjustments to transfer pricing;
- Provide supporting information for Transfer Pricing documentation or as additional information for submission to assessing authorities in defending the Transfer Pricing policies/adjustments;
- Provide a vivid and insightful overview of the financial results of the client across products, geographies, legal entities, strategic business units or even storage units;
- Identifying, classifying, consolidating or packaging information into powerful visualisations that improve and support decision-making process, including planning of transfer pricing strategies, policy & price setting;
- Vouch for the fulfillment of any potentially relevant metrics;
- Create CbC reporting for onward submission to Income Tax Department
Process Mining for Transfer Pricing Defence
3. Control of TP Processes
Using our Transfer Pricing Analytics, it is possible to run automated analyses to control and monitor transfer pricing at a transactional level, in real time. This can replace the periodic manual processes of gathering information from various data sources to check the transfer pricing policy compliances. Our Analytics facilitates ongoing monitoring of risk areas and thus – defects, deviations and mistakes can be identified very quickly and addressed on time.
The in-house tax departments/professionals can use our powerful dashboards and visualisations to understand facts and draw insights so that required actions are taken forthwith. The data monitoring mechanisms that we build using ACL Analytics, LavaStorm Business Analytics and Tableau guard the integrity, accuracy and completeness of transfer pricing data. The desired insights can be visualised on a real-time basis.
Our deliverables include:
- Operating Data analyses within an internal environment consisting of scripts and documentation of the data analysis process;
- Working Data analysis tool within the client’s internal environment;
- Indication of the duration/periodicity of the data analysis
- Trained internal team which will be able to run data analysis independently.
We are happy to provide a 1-day workshop, for you to get a better understanding of how Transfer Pricing Analytics can help you.