Transfer prices
The highly dynamic global business environment and increasing pressure from tax authorities to generate tax revenues from all possible sources place transfer pricing on the top of tax and finance issues today.
The regulatory framework for transfer pricing basically requires that the distribution of profits between related parties be consistent with the process of value creation within the group. This implies that transfer prices are in accordance with economic reality and that profits are distributed according to each member’s contributions to value creation within the group. If this is not the case, it is necessary to correct the tax base.
WTS helps taxpayers to have better understanding of transfer pricing and prepare full set of transfer pricing documentation in line with local regulations. Our work is based on OECD Guidelines for transfer pricing, Corporate Income Tax Law as well as Rulebook on transfer pricing in Serbia.
Preparation of transfer pricing reports
The Rulebook on Transfer Pricing in Serbia defines the form, deadline and content of the transfer pricing study, the selection and manner of the application of transfer pricing methods, as well as the manner of assessment of the base for the calculation of the depreciation of fixed assets acquired in transactions with related parties. According to the local regulations the content of mandatory report is as follows:
- Analysis of Group of Companies
- Analysis of taxpayer business activity
- Presentation of intercompany transactions
- Functional Analysis - Value chain and determination activities performed and risks assumed
- Selection of methods for checking the compliance of transfer prices with prices determined on the "arm's length principle" (for each method, the criteria for acceptance or rejection are explained)
- Conclusion on correction of tax base
- Attachments (data from used databases, intercompany contracts, calculations, benchmarking analyzes, etc.
After preparing the report on transfer prices, the part of the tax balance related to transfer prices is prepared.
Transfer pricing methods
According to the Rulebook on transfer pricing, the application of the following methods is envisaged, including possible combinations of methods:
- Comparable uncontrolled price (CUP) method
- Cost plus (C+) method
- Resale (RS) method
- Transactional net margin (TNM) method
- Profit split (PS) method
- All other adequate methods based on reasonable assumptions
Transfer pricing in Serbia are the new discipline in economics and they are the consequence of the new conditions and terms under which the global business is done nowadays. This field brings out significant risks, due to conflicting aspirations of the tax authorities to increase their tax revenues and multinational companies to pay lower income taxes. Regarding the fact that the calculated amount of income tax depends on the certain assumptions, such as the given data, company’s strategy and the price determining factors, it is necessary to say that the transfer prices aren’t an exact science and that the key goal is to find a reasonable estimation of the income tax in accordance with the “arm’s length” principle.
See our article about what an investor must know about transfer pricing in Serbia.

Bojan Radojičić
MANAGING PARTNER