Transfer pricing

If the company makes a strategic decision to "go abroad", many practical items need closer attention. For example: is the company also opening production facilities in the other country or will it only keep inventory? And probably, in a phase of growth, outsourcing of warehousing might also be an option.

The hiring of staff (in a start-up phase in most cases sales-people are hired) is also an important topic. What are the laws and rules connected with being an employer? How do I attract staff? Should I consider using employment agencies, rather than hiring employees myself?

These items are just examples. There is much more to cover before your business is actually operating abroad. Somewhere among these considerations the topic of transfer pricing might also play an important role. Briefly summarized: The board of the company needs to decide how to allocate profits between the home country and the subsidiaries abroad. These decisions might partially be driven by tax-considerations. It is of course attractive to set up production-facilities in low corporate tax jurisdictions. Ireland was a good example in recent decades. It attracted a great deal of business because of its low corporate tax rates.

When considering operating abroad in the most tax effective way, attention needs to be paid to:

• Operating "at arm's length", meaning the margins between the parent company and its daughter need to be comparable with the trade between two third parties.
• Tax treaties. The Netherlands, for example, has tax treaties with the most important economies in the World. The number of treaties is also quite impressive when compared with other countries.
• Tax rulings. It is possible to negotiate a tax "deal" with tax inspectors. This means that for a longer period the tax rates and the way of levying taxes can be fixed. This is very important because by means of a tax ruling, a company can secure its obligations for a longer period with respect to the tax authorities.

PHW Auditors & Tax Advisers is able to advise you in these areas and as a member of an international network is capable of steering your company towards the most attractive tax structures.