For Greek taxpayers, transfer pricing (TP) has been mainly viewed as a compliance exercise – preparation of transfer pricing documentation to support the pricing of intra-group arrangements as declared in the TP disclosure form filed with the tax return. However, transfer pricing is more than this. It can become a useful tool to support and optimize the market expansion of a group.
Several Greek headquarted groups are currently seeking to expand their operations in Europe, the United States of America and the Middle East to explore market opportunities and potential synergies with other major players. These groups are considering various market; operational; and other issues related to the expansion into new markets. However, transfer pricing is not always a high priority and this can result in lower efficiencies from a business and tax perspective.
Firstly, businesses with appropriate transfer pricing strategies can control profit allocation among group members. This allows businesses to align value creation with profitability and support the establishment of subsidiaries to new markets with lower margins to gain market share. Further to this, businesses can enhance liquidity management with the use of an efficient TP framework by transferring funds to the entities that need support. This can be achieved through real-time monitoring of the transfer prices, while any discrepancies can be identified and addressed quickly during the financial year. From this perspective, TP can also play a pivotal role in relation to the repatriation of profits from foreign subsidiaries in an efficient manner.
Lastly, groups with defendable TP policies can manage global tax burdens effectively while ensuring compliance with local tax and transfer pricing requirements.
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