As a simple definition, the transfer price is the price at which a person (natural or legal) transfer assets - tangible and / or intangible - and services to an affiliated person. Transactions between related parties are made according to the principle of free market price - "the arm's length principle", as it is found in OECD guide related to transfer pricing - without being influenced by the relationship of "kinship" between them.

The term "transfer pricing" is used for transactions between related parties, depicting those transactions which are not only subject to the rules of the free market and, therefore, can be influenced by other subjective factors.

Why is transfer pricing so important ?

Adopting a transfer pricing policy can influence not only the profitability of an affiliated person by means of the allocation of profits and of the tax due, but also the group's investment decisions, as well as the business model to be implemented, the cash flow and performance indicators of the company in question.

Transfer pricing is both an opportunity and a threat, its impact on affiliated persons businesses being significant. Addressing such a vast area can bring benefits to companies in terms of operational advantages, such as knowledge regarding related party transactions and in identifying opportunities for allocation of revenues and expenditures, deep understanding of the business model and of the optimization capabilities, which in other conditions may be overlooked.

Privately-owned companies need to establish an effective fiscal policy in order to be in accordance with the developed business model and also to be sustained before the tax authorities. Such companies may face many challenges in developing and implementing transfer pricing policies, as well as in preparing the related documentation, in accordance with legislative requirements in Romania, especially due to limited internal resources and the complexity of the subject.

How can Rödl & Partner assist you in preparing transfer pricing file?

From the second half of 2008, multinational companies started to face increasingly often controls from tax authorities in Romania, controls related to transfer pricing file method. The major problem taxpayers are facing nowadays is generated by the fact that transfer pricing is not the subject of a positive science, therefore, their determination is a subjective matter, which can give rise to different interpretations by the tax authorities.

To overcome the negative effects of non-compliance with the provisions on transfer pricing, taxpayers may "protect" themselves by preparing in advance the transfer pricing documentation for all transactions carried out with affiliated persons.

Rödl & Partner Romania team has access to specialized data base (Amadeus) and has the resources and expertise required to prepare a qualitative documentation, in order to support the reasonableness of adopted transfer pricing policy, as well as a solid justification balance between the risks assumed and investments made, on the one hand, and the remuneration received and profits, on the other hand, for all types of companies and intra-group transactions. Thus, our clients have the certainty that the assembled files will respond at any time to any tax inspection requirements.