Operational Transfer Pricing (OTP) Review is a proactive approach of pricing individual inter-company transactions consistent with transfer pricing policies, and inter-company agreements that are aligned to your business model footprint.

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OPERATIONAL TRANSFER PRICING REVIEW
Key Points
• An Operational Transfer Pricing (OTP) Review is a proactive approach of pricing individual
intercompany transactions consistent with transfer pricing policies, intercompany agreements
that are aligned to your business model footprint.
• If your company has intercompany cross border transactions can you identify potential issues in
advance and fix them before they develop into major problems. Unfortunately waiting until year-
end to solve and make adjustments may complicate matters; an OTP approach avoids surprises
and improves transparency and efficiency.
• While most companies and tax service providers focus on the preparation of economic analyses
and transfer pricing studies to document and support a particular transaction’s transfer pricing,
there typically is limited subsequent oversight. For example, how do you monitor the execution
of pricing individual intercompany transactions to accurately reflect transfer pricing policies and
compliance reporting requirements?
• Do you have difficulties achieving the intended transfer pricing results with a history of large year-
end adjustments or inconsistent or unpredictable results year over year? Are there out of synch
results or tax leakages due to initial overpricing for products and thus overpaying custom costs?
• If a company has gaps in their process for complying with transfer pricing requirements it may
face increased scrutiny from tax authorities and our OTP Review can help determine potential tax
risk and financial risk exposure and remediation steps.
What is operational transfer pricing?
OTP is the proactive management of transfer pricing policies. By effectively streamlining data, assessing
information available in the company's financial systems, increasing process efficiency and the
complexity of an organization as well as multiple layers of international transactions, OTP provides an
opportunity to strengthen and develop a more efficient transfer pricing lifecycle.
The goal is for OTP to align an organization’s tax, finance, and operations functions to deliver an end-to-
end approach to transfer pricing that can help properly manage financial statements adjustments and
global tax compliance burdens.
B e r g q u i s t & R o s s i
Trusted Corporate Tax and Transfer Pricing Advisors

2. Background
In general any form of risk management is a process of identifying, quantifying and managing the risks
that an organization faces. Within the international tax field, surveys of multinational companies
indicate year after year that transfer pricing is the greatest source of risk. This has been accentuated in
recent years by the growing number of countries that have implemented transfer pricing regulations.
In addition, as a result of the Base Erosion and Profit Shifting (BEPS) project, different tax authorities
exchange more and more tax and financial data. This makes it easier for tax authorities to identify
whether the arm’s length price is correct or is at risk. This increased scrutiny allows tax authorities of
each country to seek to get a fair share of the profits.
The elements of OTP and its risk management include the following elements, not necessarily in order of
importance:
• Comply with global transfer pricing data requirements while actively supporting corporate tax
strategies;
• Ensure true-ups and adjustments are accurately processed and reflected in TP reporting figures
regardless of frequency;
• Manage intercompany sales of goods and other transactions to ensure they are priced in line
with the arm’s length pricing policies
• Increase awareness within the company of transfer pricing while engaging key stakeholders;
The following items are some common examples of areas that we typically focus as part of the overall
OTP Review:
1. Governance:
a. Delegations of authority to executives and managers accountable for transfer pricing
management including a resolution process for conflicts that may arise among different
functional disciplines and affiliates.
b. Written policies and procedures.
i. All Intercompany transactions must be valued at an arm’s-length price;
ii. All Intercompany transactions must be cash settled; and
iii. All intercompany transactions must be documented by a signed intercompany
service agreement.
2. Transfer Pricing Studies and Economic Analyses
3. Intellectual Property Management: Work with R&D and Legal on the siting or migration of
intellectual property or intangibles.
4. Supply Chain Management:
a. Work with Manufacturing and other Finance areas to integrate physical and financial
invoicing supply chains.
b. Coordination with indirect taxes: VAT/GST and duties.
5. Services Cost Allocation:
a. Establish methodology for allocating cost of beneficial management services.
b. Periodically survey time and key indices for cost allocation purposes.
c. Perform cost allocation computations.
6. Intercompany Legal Agreements: Work with Legal on the execution of relevant agreements.

3. 7. IT/Financial systems management:
a. Repository of transfer prices and revisions.
b. Field submissions of transfer pricing related data and proposals.
c. Projected and actual profitability calculations.
d. Monitoring of profitability vs. target and true-up adjustment process.
e. Integration with other financial systems, such as cost accounting and invoicing systems.
f. Services cost allocation system.
g. Document management of approval actions and intercompany legal agreements.
How we can help:
We offer a number of OTP services, from conducting functional analyses and benchmarking studies, to
drafting intercompany policies and transfer pricing documentation and planning. Our services are
focused to meet your company’s specific needs, which can include:
• Process and policy improvement – Ensuring compliance while managing data, and reporting
aspects of Transfer Pricing.
• Large or small projects solutions – OTP can be accomplished for small projects such as
reviewing manual spreadsheets process for accuracy and error prevention.
• Preforming an initial assessment – using best practice benchmarking, value chain analysis and
diagnostic tools to evaluate your transfer pricing operating model we will provide a report which
will identify any areas of risk.
• Provide and recommend a plan to reduce complexity and improve outcomes to ensure that
intercompany pricing, invoicing and other processes are simple and sustainable from a tax
perspective.
If you are not prepared to provide a consistent explanation of your companies transfer pricing practices
to tax authorities, or ensure ongoing monitoring, maintenance and analysis of the overall arms-length
process and the resulting transfer pricing financial impacts, now is the time to consider an OTP Review.
Bergquist & Rossi is the value alternative, providing quality service at a reasonable price. For
more information, please contact gkyroudis@brtaxlaw.com at:
George Kyroudis, CPA. - Director
Bergquist & Rossi, P.C.
T: 312-294-0004 C: 312-493-2546