Transfer pricing documentation – a complex topic made simple

Hamburg, 24 November 2020 – Hamburg-based hsp Handels-Software-Partner GmbH, in partnership with the auditing firm ADKL AG, has developed, for the first time, software that meets the requirements for the Preparation of transfer pricing documentation systematically covers. With the Opti.Tax software, which can edit and utilise taxonomies, the market is being provided, for the first time, with a tool to standardise this tax documentation. This is because, under Section 90(3) of the German Fiscal Code, transfer pricing documentation is a key focus of every field audit and is an essential part of good compliance.

In every tax audit, companies and consultants are faced with the requirement to prepare transfer pricing documentation – and in some cases find this overwhelming. „The obligation to provide transfer pricing documentation stems from tax law, but in terms of content, 95 per cent of users regard it as a business-oriented, figures-based document,“ says Tobias Polka, auditor and tax adviser at ADKL. „That is why, as a first step, everyone tries to tackle this issue using standard business management technologies and ERP systems. However, the completeness and structure required by the tax authorities are just as important. In practice, Word and Excel are frequently used for this. Yet this is precisely what leads to media breaks.“ When legislation changes, the templates then have to be manually adapted, which involves a great deal of effort. „These media breaks are not commensurate with today’s level of digitalisation,“ adds Paul Liese, Managing Director of hsp.

The idea of systematically addressing the issue of transfer pricing documentation using a software solution came to Paul Liese in May 2018. As the Opti.Tax software became increasingly mature in the areas of Procedural documentation, ICS and Tax Compliance Management System It soon became clear that transfer pricing would be the next topic on the agenda for the Hamburg-based software company. To ensure the tax law issue was covered as comprehensively as possible from a technical perspective, ADKL came into the picture: „It was very important to us to incorporate the renowned audit firm’s many years of market experience into the product and to have a highly competent team of experts on hand to advise on the subject,“ explains Paul Liese.

Until now, there has been no technological solution in Germany that standardises transfer pricing documentation and makes it easier for users. The combination of technology and specialist expertise now provides the basis for greatly simplifying the documentation process within the application: users are provided with a clear framework featuring predefined fields, which are populated with data – for example, from the company’s BI tools. Changes to the legal landscape are taken into account by the experts in the next version of the taxonomy and released in the subsequent version of the software. This enables companies and their advisers to conduct their international business with confidence, without having to worry about the annual challenge of ensuring correct transfer pricing.