Do price adjustments trigger tax risks?
Theoretically, a price change mechanism is simple: in plus, in minus, retroactive or on an ongoing basis – these concepts are well-known to a person dealing with accounting.
Having said that…
Our many years of experience show that adjustments, including transfer pricing adjustments, are one of the most complex challenges taxpayers face.
The matter is vague for both taxpayers and tax authorities, which is also evidenced by the inconsistent case-law.
Invoice adjustments raise the following questions:
That is why a verification, and a comprehensive review, are so important to help determine whether the adjustments are a topic you need to deal with and if so, to what extent. Your next step should be to determine how to secure adjustments in terms of Transfer Pricing / CIT / customs / VAT.
How can we help?
- identifying the essence of price adjustments in the company,
- identifying and analyzing possible risks related to price adjustments,
- a review report highlighting areas where adjustments should be analyzed or situations where adjustments should be applied,
- an indication of how to eliminate/minimize the risks, including a recommendation to possibly apply for an individual interpretation.
- drafting contracts that summarize the proposed solutions,
- preparing a reporting manual and/or
- internal procedures in the form of a policy for price adjustment and/or
- a practical checklist – a sequence of actions matching specific facts of a case or
- a template for calculating adjustments.
Support in the form of regular reviews whether the applied solutions have been properly implemented.
- We will comprehensively verify your company processes and show how to arrange them and how to effectively secure your tax settlements following price adjustments.
- We will advise how to label the adjustment, what is the tax authorities’ approach, what are the statutory requirements and what may be the practical impact on CIT, VAT, customs and transfer pricing.
- We will show you how to shift the approach to make it right.
- We will signal the timing for taking the first steps to prepare the price change process (e.g. recommended flow of information between entities) and brief you on how to approach already started processes in this respect.