The highly dynamic global business environment and increasing pressure from tax authorities to generate tax revenues from all sources, put transfer pricing on the top of tax and finance issues today. We help our clients to have better understanding of transfer pricing and prepare full pack 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.

Global Transfer Pricing Service Line

The global transfer pricing service line of WTS is represented by WTS Global member firms in all key countries including tax specialists, economists and former revenue authority professionals with extensive transfer pricing experience. The service offering comprises the whole range of TP services including TP conceptual design, global documentation concepts, IP structuring and reorganizations, benchmarking services, tax audit defence, litigation and arbitration proceedings as well as APAs.  WTS represents a practice-oriented approach committed to develop innovative and pragmatic solutions for clients from various different industries.

Our team in Serbia provides TP services in Serbia, Montenegro and Bosnia & Herzegovina.

Preparation of transfer pricing study

The Rulebook on Transfer Pricing defines the form, deadline and content of the transfer pricing documentation, 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 Company Business and Factual analysis
  • Presentation of intercompany transactions
  • Functional Analysis - Value chain and determination activities performed and risks assumed
  • Consideration of Transfer pricing methods used for transactions
  • Findings and final tax corrections
  • Appendix (extract from relevant database, intercompany agreements etc.)


According to the Rulebook on Transfer pricing, following methods are allowed, including potential combination of methods:

  • Comparable Uncontrolled Price Method (CUP)
  • Cost plus method
  • Resale minus method
  • Transactional net margin method (TNMM)
  • Profit Split method (PS)
  • All others appropriate methods based on reasonable assumptions

Transfer prices 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.

Questionnaire for transfer pricing services

Benchmark studies and other analysis from relevant databases

The arm’s length standard requires related companies to apply transfer prices that are comparable to prices between unrelated companies that conduct business under comparable economic conditions, in particular regarding their added value, their assets, functions, and risks as well as the particular underlying economic, political, and social circumstances. To be able to estimate what unrelated parties would agree on, the search aims at identifying independent comparable companies in the database. Searching various databases (international or domestic), identifying comparable companies and their profit margins are the main goals of  a benchmark study.

The main criteria in creating the list of potentially comparable companies are:

  • Independence: potentially comparable companies must not have any related parties
  • Available financial statements in last 3 years
  • Activity: searching only active companies which still perform regular business activities
  • Geography: Rulebook on transfer pricing demands searching for comparable companies in the domestic market first. Only in case there are not sufficient comparable companies, in order to ensure a sufficient level of comparability for the calculation of prices that meets “arm length principle”, the geographic market can be expanded
  • Excluding companies with negative financial results in three consecutive years
  • Year of incorporation: The criterion “year of incorporation screening” prevents the arm’s length range from being affected by companies that are in a start-up phase and therefore have non-comparable economic conditions during the considered period
  • Industry Screening: using NACE Rev. 2 codes
  • Revenues: In order to ensure better comparability and eliminating the impact of specific factors that may affect the business, we select potentially comparable companies on the basis of the amount of revenues

After the list of potentially comparable companies is created, manual search (qualitative analysis) is performed. The resulting set of potentially comparable companies in the database is analysed from the perspective of:

  • A description of activities provided in the base
  • Content on the websites of companies and other publicly available information on the Internet
  • Additional assurances that the company identified no related parties and
  • The comparability regarding the use of net working capital and fixed assets (through ratio analysis of financial statements)

Advices in pricing policy with related parties

In order to minimize potential transfer pricing risks, tax payer should proactively plan transactions with its related parties. Also, the tax payer can define its transfer pricing policies in a way which will reduce tax expenses significantly.

For constructing transfer pricing policy and reforming current transfer pricing policies, we remain at your disposal.

Preparation of intercompany agreements

Transfer pricing policies must be regulated by intercompany agreements, so tax authorities can be assured that prices in tax payer’s transactions with related parties are in accordance with ‘’arm’s length principle’’. For the purpose of preparing intercompany agreements, we remain at your disposal.

Transfer of intangibles and intercompany services

Transfer of intangibles

The basis for generating profit inside the Group are intangibles, e.g. brand, licences, franchise, know-how, patent, software etc. Having that fact in mind, Group's profit allocation among its members according to the ''arm's length'' principle is based on contributions of each member in creating Group's intangible assets. Intercompany transactions of using and transferring intangibles are common, but they are rarely documented and valued in accordance with ''arm's length'' principle, which exposes tax payers to transfer pricing risks. When analyzing these transactions, it is important to identify specific intangibles, costs and activities incurred during the process of creating them (analysis of contributions in creating intangibles), their impact on financial performances and benefits which will provide to their owner in future (valuation of intangibles).

Intercompany services

Regarding services provided by non-resident companies, especially parent and other related companies, the distinction must be made between:

A. The necessity of providing documentation which proves that these services were really provided- Article 7a of Corporate Income Tax Law and
B. The analysis of these costs from the transfer pricing perspective, where following matters are analysed:

  1. Allocation of total costs on Group members
  2. Justification of adding margin on formed cost base, whose accordance with ‘’arm’s length principle’’ is tested by using adequate transfer pricing method which usually demand using commercial databases

Having in mind the importance of providing intercompany services, it is necessary to pay attention to general legal implication of payments to non-residents.

According to the Law on Foreign Exchange Operations, Article 58, an individual who performs payment collection, who pays or makes payment request, i.e. pays the amount above 100.000 EUR to a non-resident, on the basis of a contract in which the real price is not disclosed or on the basis of false documentation, will be punished for criminal offence. Related to this matter, the main questions are ‘’Are these services really provided?’’ and ‘’How to prove that these services are really provided?’’. Therefore, it is necessary to conduct activities very carefully, so responsible persons do not get charged for the violation of law and criminal offence.

Our team of experts is ready to provide you support in ensuring that any type of these services is in accordance with relevant laws.

Bojan Radojičić
Bojan Radojičić
MANAGING PARTNER
+ 381 60 70 330 40
Srećko Ćosović
Srećko Ćosović
FINANCE CONSULTING EXPERT
+ 381 60 70 330 80