Transfer Pricing Studies
Comprehensive transfer pricing documentation for multinational companies operating in Israel and abroad. OECD-compliant studies ensuring arm's length principle compliance and tax authority acceptance.
Transfer Pricing Study Facts
What is Transfer Pricing?
Transfer pricing refers to the pricing of goods, services, and intangibles between related entities across borders. Proper documentation ensures compliance with OECD guidelines, Israeli tax legislation, and the arm's length principle -- preventing tax disputes and penalties.
OECD Compliance
Full compliance with OECD Transfer Pricing Guidelines, including BEPS Action 13 Master File and Local File documentation requirements.
Arm's Length Principle
Rigorous economic analysis ensuring related party transactions meet arm's length standards using comparable uncontrolled price, cost-plus, or profit split methods.
Israeli Tax Authority
Expert knowledge of Israeli Transfer Pricing Circular 2/2006 and compliance with Israeli Tax Authority documentation requirements and audit procedures.
Why Transfer Pricing Documentation Matters
Multinational companies face increasing scrutiny from tax authorities worldwide. Proper transfer pricing documentation protects against costly audits, penalties, and double taxation.
Risks of Non-Compliance
- •Tax penalties up to 30% of unpaid taxes in Israel
- •Criminal liability for tax evasion (up to 7 years imprisonment)
- •Double taxation without relief from foreign tax credits
- •Reputational damage and increased audit scrutiny
- •Disallowance of intercompany charges and deductions
Benefits of Compliance
- •Reduced audit risk and penalty protection
- •Safe harbor from penalties with contemporaneous documentation
- •Burden of proof shifted to tax authorities in audits
- •Advance Pricing Agreement (APA) eligibility
- •Efficient tax planning and cash flow management
Our Transfer Pricing Services
Comprehensive transfer pricing solutions tailored to your multinational structure
Transfer Pricing Study
Comprehensive documentation of intercompany transactions including functional analysis, economic analysis, and benchmarking studies.
- •Functional and risk analysis
- •Transfer pricing method selection and justification
- •Benchmarking analysis with comparable companies
- •Documentation of arm's length pricing
- •Master File and Local File preparation
Advance Pricing Agreements
Bilateral or unilateral APAs with Israeli Tax Authority providing certainty and reducing compliance burden for future periods.
- •APA strategy and feasibility assessment
- •Economic analysis and position papers
- •Tax authority negotiation support
- •Annual compliance monitoring
- •Rollback provisions for prior years
Transfer Pricing Audit Support
Defense and representation during Israeli Tax Authority transfer pricing audits and appeals process.
- •Audit defense strategy development
- •Information requests response management
- •Expert testimony and position papers
- •Negotiation with tax examiners
- •Appeals and litigation support
Annual TP Compliance Updates
Ongoing annual updates to transfer pricing documentation ensuring continuous compliance with current regulations and transaction changes.
- •Annual benchmarking refresh
- •Documentation updates for new transactions
- •Regulatory monitoring and compliance alerts
- •Financial data updates and reconciliation
- •Country-by-Country Reporting (CbCR)
OECD Guidelines & Israeli Tax Legislation
Our transfer pricing studies strictly adhere to international and local standards
OECD Transfer Pricing Guidelines
- Chapter I-III: Arm's length principle and transfer pricing methods
- Chapter V: Documentation (Master File, Local File, CbCR)
- Chapter VI: Intangible property transactions
- Chapter VII: Intra-group services
- Chapter VIII: Cost contribution arrangements
- BEPS Actions 8-10: Aligning transfer pricing with value creation
- BEPS Action 13: Three-tiered documentation approach
Israeli Transfer Pricing Legislation
- Income Tax Ordinance Section 85A: Arm's length principle
- Transfer Pricing Circular 2/2006: Israeli TP documentation requirements
- Circular 4/2018: BEPS implementation and CbCR
- Safe Harbor Rules: Low-value-adding intra-group services
- Penalty Protection: Contemporaneous documentation requirements
- APA Program: Advance Pricing Agreement framework
- Documentation Threshold: NIS 50 million in related party transactions
Transfer Pricing Methods We Apply
CUP Method
Comparable Uncontrolled Price - comparing prices charged in controlled transactions to comparable uncontrolled transactions
Cost Plus Method
Adding an appropriate markup to the costs incurred by the supplier of goods or services in a controlled transaction
Resale Price Method
Starting with the resale price and subtracting an appropriate gross margin representing functions performed
TNMM
Transactional Net Margin Method - examining net profit margin relative to an appropriate base (costs, sales, assets)
Profit Split Method
Splitting combined profits from controlled transactions based on relative value contributions of each party
Other Methods
Unspecified methods may be used when traditional methods cannot be reliably applied to determine arm's length pricing
Our Transfer Pricing Study Process
A systematic approach ensuring comprehensive documentation and compliance
Information Gathering
Collect organizational structure, financial data, intercompany agreements, and functional profiles of all related entities.
Functional Analysis
Analyze functions performed, assets employed, and risks assumed by each party to the intercompany transactions.
Economic Analysis
Select most appropriate transfer pricing method and conduct benchmarking study using comparable companies and transactions.
Documentation
Prepare comprehensive Master File and Local File documentation meeting OECD and Israeli Tax Authority requirements.
Transfer Pricing Study Pricing
Transparent pricing based on transaction complexity and entity structure
Basic Study
- Single jurisdiction
- 1-2 transaction types
- Basic benchmarking study
- Local File only
- 3-4 week turnaround
Standard Study
- Multi-jurisdiction coverage
- 3-5 transaction types
- Comprehensive benchmarking
- Master File + Local File
- 4-5 week turnaround
- Intangibles analysis
Complex Study
- Multiple jurisdictions
- 5+ transaction types
- Advanced economic modeling
- Full three-tier documentation
- 5-6 week turnaround
- Intangibles & cost sharing
- APA support included
Annual Updates: We offer discounted annual update services (typically 40-60% of initial study cost) to keep your transfer pricing documentation current with minimal effort.
Transfer Pricing FAQs
When is transfer pricing documentation required in Israel?
What is the arm's length principle?
What are the penalties for transfer pricing non-compliance in Israel?
How long does a transfer pricing study take?
What is Country-by-Country Reporting (CbCR)?
Can transfer pricing documentation be prepared retroactively?
Ready to Ensure Transfer Pricing Compliance?
Protect your company from tax authority challenges with comprehensive OECD-compliant transfer pricing documentation. Schedule a consultation to discuss your specific needs.