Operational Transfer Pricing (OTP)
Historically, multi-national companies have grappled with Operational Transfer Pricing (OTP)-related processes and systems in order to satisfy regulatory and business objectives. Implementation of the Base Erosion & Profit Shifting (BEPS) project by the OECD will mean increased scrutiny in the eyes of the tax authorities.
Companies struggle to address these basic Transfer Pricing (TP) needs, and are prone to follow an ad-hoc approach for some or all of them. This includes a patchwork of Enterprise systems and manual activities, to capture, calculate, monitor and manage Transfer Pricing.
Ensuring Compliance while Managing Data and Reporting Aspects of Transfer Pricing
The need of the hour is to achieve transparency in OTP and monitor execution of the TP System. This is expected to provide clarity in TP transactions. An expected outcome is reduced cost of doing business, with fewer audit findings and a lower risk of double taxation and penalties.
Crucial elements in an effective TP program include:
- awareness of TP needs in the organization
- an organization to handle TP, including ownership
- TP policies and parameters
- enterprise systems for capturing TP-related data and its periodic processing
- comparing actual performance against TP parameters
- addressing deviations
EXA provides THE comprehensive solution to capture, calculate, monitor and manage Transfer Pricing while being fully compliant with regulatory needs.
The extremely user-friendly and cutting-edge EXA OTP solution benefits from our mature Global Value Chain solution. EXA OTP can provide visibility across all value chains in an organization.
EXA OTP can help establish IT system elements of a Transfer Pricing System to monitor Transfer Pricing activities. The solution can provide a greater level of control- enabling transparency and reporting insights. This will change the way stakeholders manage end-to-end Transfer Pricing process.
- Flexible setup of TP Aggregates (business segments or value chains) based on any level of product hierarchy
- Complete flexibility – customizing TP methods, account settings, cost allocations and much more
- Creation of segmented P&L for all TP Aggregates
- Rule-based allocation of indirect costs to TP Aggregates, from where they will be distributed automatically to material level during run-time
- Clear visibility to disparities – see an overview of actual Transfer Prices against guidelines and targets
- Analysis capability – analyze distribution of EBT for each TP Aggregate across all entities in the organization
- Simulation capabilities – to forecast TP results and thereby providing timely opportunity for possible corrections and price updates
- Dashboards providing an excellent pictorial representation of Value Chains and an overview of Profit Splits and the Transaction Matrix
- Eliminate manual creation of segmented reporting in the controlling/tax department to provide company-wide analysis for TP Aggregates
- Manage transfer prices continuously through periodic analysis, to avoid late or end-of-year adjustments
- Provide visibility of TP risks to all stakeholders
- Run Root-Cause-Analysis for any internal and external audit issues at any point in time
- Act as the single source of truth for TP-related data, information and reporting
EXA Operational Transfer Pricing Management Solution
- is a standard SAP® Add-On that runs on In-memory database SAP HANA® with a SAP NetWeaver® stack
- has a modern SAP® UI5/Fiori interface for browser-based access
- uses the SAP® authorization concept; can be easily embedded in the existing authorization strategy
- is developed in EXA’s own namespace