From the ground up: building a compliant and sustainable transfer pricing function

Having never built anything more complex than a 3x3 Lego tower, a homebuilding metaphor may seem inapt for this blog. Yet few comparisons better fit the process by which multinational enterprises design and build a transfer pricing function that can withstand change and challenges, and perhaps become more valuable over time.

• The foundation: value chain analysis. Before you even think about building, you understand the ground underneath you. In the transfer pricing world, this means a cross-functional value chain analysis in which the transfer pricing functional lead develops a thorough understanding of the entity's business model, its internal supply chain, and its strategy for growth and development.
• The blueprint: transfer pricing policy planning. Once a location is set, it’s time for a detailed plan. The esign must be structurally sound, but also must address constraints in capacity or execution. Likewise, a great transfer pricing policy is established with an eye toward both compliance and scalability. This seems like a good time to plug the benefits of an experienced and involved architect (read: Transfer Pricing advisor).
• The frame: operational implementation. The best blueprint is worthless with shoddy construction workmanship. Likewise, your transfer pricing strategy and documentation aren’t worth the e-paper they’re e-written on if they don’t demonstrably tie back to your financial statements.
• The siding, shingles and insulation: documentation. You’ve got a lot of options in terms of how to cover your frame and protect your dwelling from the elements. Perhaps you’re in a location with a lot of natural disasters (cross-border controversy); maybe your HOA (external auditor) requires regular evidence of upkeep and compliance with local standards. You need to invest in the materials required by your jurisdiction and which will make for comfortable (and hopefully low-maintenance) living.

Unable to resist stretching the metaphor to heroic lengths, let’s consider a few bonus categories. Your neighborhood comprises the MNE’s other tax, finance, and operational stakeholders, none of whom you want to alienate or aggravate by blaring loud music or accidentally starting a blaze. Your deed and title correspond to the legal agreements which memorialize every step of the build-out process. And finally, let’s not forget about home equity. Whether you simply want to leave behind something valuable and enduring, or whether you hope to one day sell for more than you paid, a thoughtful, intentional, and well-kept residency is key.