Why Transfer Pricing should be part of your ERP transformation

In this context, tax leaders often ask us whether they should handle transfer pricing within their company’s ERP system.

The right answer will depend on several factors: the group’s structure and transfer pricing model; the effectiveness of its transfer pricing compliance and reporting processes; and the cost of implementation. In particular, the more complex the group structure and transfer pricing model are, the more compelling the case for managing transfer pricing within the ERP platform.

As a rule, incorporating transfer pricing will offer advantages on three fronts.

Firstly, value. With the ERP tackling transfer pricing, your tax team can stand back and consider the bigger picture and strategic priorities – such as assessing transfer pricing policy, and looking holistically at the results being reported.

Secondly, risk. Automating transfer pricing calculations will reduce the possibility of manual intervention and human error. In addition, integrating your transfer pricing processes and data within the ERP will mean better transparency and auditability.

Thirdly – and perhaps most significantly – efficiency. Designing transfer pricing into your ERP transformation upfront will be easier and cheaper than ‘reverse engineering’ it into the system later on. And it will ease your decision-making process, from sourcing and supply chain to transportation and logistics, with clear transactional tax determination.