Transfer Pricing Risks:
Risk Management for Transfer Pricing
Transfer pricing tax insurance for companies
When it comes to taxes, uncertainty can lead to risks and high costs. For this reason, we offer transfer pricing tax insurance to provide companies with a reliable alternative to binding information from the relevant tax authorities. Our team of experts advises, analyses and evaluates your situation and thus creates legal certainty.
Consultancy procedure
01
Identify the intercompany transaction to be insured
In principle all types of transactions are insurable. It is feasible to obtain insurance for transactions implemented in previous years as well as on a going-forward basis. TPI provides consultation on identifying those transactions for which insurance may offer optimal cost/benefit – see below
The reporting package consists of the available transfer pricing analysis, benchmark reports and intercompany agreements. The obligation to disclosure includes all relevant information (including expert memos etc.) pertaining to the transaction. ALL INFORMATION WILL BE STRICTLY CONFIDENTIAL – ALL INVOLVED PARTIES WILL BE SUBJECT TO NDAs. TPI will review documents and support the compilation of the reporting package.
02
Compile the background information on the transaction
03
Specify desired scope of insurance.
To obtain competitive quotes, companies need to delineate the desired scope of insurance (time, geography, “policy limit” and “maximum liability sought” etc.) The scope will have to appropriately reflect the underlying transaction volumes and be adjusted to the transaction-type. Transfer Pricing Insurance and the respective maximum liability will be calibrated to cover tax adjustments, defense costs as well as penalties. In respect to defense costs, it is to be understood that the need to defend the position only extents to national court proceeding (a potential MAP is out of scope – i.e. depending on the case at hand, the Insurer will decide to defend the claim in court, but a the company is under no obligation to purse a MAP ) TPI will support in identifying an optimal scope and outline a specific request for tenders.
Upon submission of Reporting Package, the company will receive feedback on non-binding terms (NBTs) submitted by Insurance companies – within 3 to 4 days. TPI will support the company in evaluating NBTs. In case no acceptable NBTs are obtained TPI will review the scope of the requested insurance and advise on amendments. NO FEES WILL BE CHARGED UNTIL AN ACCEPTABLE NBT IS IDENTIFIED
04
Quoting
05
Underwriting process
Once an NBT is accepted, the underwriting process will commence. As part of the underwriting process the Insurer will define an “expense agreement”. During the underwriting process the Insurer will address questions pertaining to the reporting package and may request additional information. Based on the detailed assessment an insurance policy will be proposed. A typical underwriting process will be completed between two to three weeks. TPI will support the client throughout the underwriting process. Specifically, TPI will facilitate discussions regarding additional information requests as well as perceived risk exposure. We will also help to specify and discuss amendments to the policy – as required.
Having successfully obtained the insurance, the client will be charged the applicable premiums by the insurance company – annually, depending on the duration of the insurance. TPI will support the administrative processes (invoicing) between insurance company and client – if applicable.
06
Conclusion of insurance and implementation
