Service transactions are among the most common arrangements within corporate groups and, at the same time, one of the highest-risk areas from a tax audit perspective. Our analysis provides an objective assessment confirming that the remuneration for services rendered between related parties is in line with the arm’s length principle.
As part of the service, we prepare:
1. Assessment of the nature and justification of the service: identification of the type of services (operational, management support, IT, marketing, accounting, logistics, R&D),evaluation of the functions performed, assets used and risks borne by the parties,optionally: confirmation that the services were actually provided and generated value for the recipient (benefit test), analysis of potential duplication of functions within the group and “shareholder activities”.
2. Selection of the appropriate set of comparable data: identification of the correct pricing model (cost-plus, lump-sum, success fee, unit-based charges),verification or calculation of the actual profitability level for the selected profit level indicator,identification of the relevant data set (internal data or external databases).
3. Benchmarking analysis: selection of the appropriate transfer pricing method for comparability purposes (TNMM, CUP, Profit Split, Cost Plus),selection of the relevant external database if needed (Amadeus, Orbis, RoyaltyRange),initial automated filtering based on criteria identified in earlier steps (reducing the sample from several million to several thousand entities),narrowing the results to a set suitable for manual screening — typically around 150 entities,obtaining the final sample (from 5 to 50 entities) and determining the interquartile or full arm’s-length range.
4. Documentation and argumentation: preparation of a draft analysis in Word format, including appendices with financial data and calculations,preparation of conclusions for Local File or Master File documentation,exchange of comments and delivery of the final version (approx. 15 pages in Word + Excel and PDF attachments).
Client outcome: The analysis not only confirms the arm’s-length nature of the remuneration but also streamlines service-charging processes within the group, reduces tax-related risks, and prepares the organisation for potential audits.
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