International tax authorities have increased their sophistication over the years to become much more aggressive at investigating and enforcing tax compliance. While the intent of transfer pricing is to represent the true cost of goods and services in each tax jurisdiction, a major theme today is ensuring tax compliance across an often complex set of legal entity routings.
Large end-of-year adjustments have become a red flag for tax authorities and are increasingly being disallowed. This can leave substantial amounts of money unrecoverable in tariffs, duties, or higher tax jurisdictions, not to mention the potentially high cost of enforcement actions. Because of this, tax compliance cannot just be about designing an optimal transfer pricing process, it must also measure it in real-time so monthly adjustments can be made in order to hit the targets.
PlaidCloud helps to ensure the designed transfer pricing and intercompany invoicing process is being followed and that adjustments are made throughout the year in a transparent and auditable manner. Applying markups, withholding, VAT, calculating royalty payments, and other critical information is simply part of the controlled process rather than being left as an offline processes which are often over simplified, highly manual, and a significant audit focus.
Detailed intercompany invoicing is an essential element to a successful transfer pricing process as it provides direct evidence that all tax laws are followed and payments for goods and services are arms-length transactions that apply withholding, VAT, GST, local, regional, and surtaxes properly. Production of high quality invoices that comply with country specific language and required elements can be challenging when operated in a decentralized manner. Fully automated invoicing with your system of record (e.g. SAP, Oracle, etc…) ensures full traceability and defensible compliance during tax audits.
PlaidCloud supports multi-layer and sequenced billing scenarios with configurable markups at each leg of the process. In addition, PlaidCloud’s optional integration with SAP allows direct sourcing of financial information for billing including postings for sequenced billing scenarios. Sourcing of information and postings can span multiple SAP instances located throughout the world.
Due to the timing of global operations, their may be a need for accruals after intercompany invoicing completes. PlaidCloud can calculate and post accruals automatically too.
PlaidCloud supports transfer pricing and intercompany invoicing processes at companies with billions of dollars moving between tax jurisdictions for both services and tangible goods.