“The market has been demanding a transfer pricing service for some time,” says Erwan Loquet, partner tax at Deloitte Luxembourg. Indeed, from an international perspective, intercompany transfers of all sorts of goods, services and even intellectual property are facing more and more transfer pricing rules. Luxembourg, with its plethora of companies with international parents or subsidiaries, has not escaped this trend. Which explains why, last September, Deloitte Luxembourg decided to set up a new service which was officially launched in January this year. The service will use the expertise of tax director Marc Rasch, who has four years experience of transfer pricing in France and, prior to that, in the Netherlands. “In France there was a focus on tax audits,” Rasch explains. “The moment they feel something with profit or tax potential is being transferred to another country, they try to ensure the tax income is retained within France.” In the Netherlands, on the other hand, Rasch noticed the attention of the authorities was more geared towards documentation requirements. “That means you have to have your transfer pricing policy and documentation in place every year. The Netherlands is perhaps more pragmatic than France, but it is interesting to see the attitude of different countries to transfer pricing policy.” Indeed, while the OECD has issued guidelines on transfer pricing – incorporating the renowned arm’s length principle – each country will have its own local interpretation of the rules.

Expert transfer pricing analysis therefore requires in-depth knowledge of both tax and economics. “It is a combination of areas of expertise that is quite difficult to find in Luxembourg. There are very few transfer pricing specialists here,” says Loquet. Whether that will change as transfer pricing becomes more and more a key challenge for multinationals remains to be seen. For the moment, he says Deloitte can lay claim to being the only local company to have a full-time expert uniquely dedicated to transfer pricing. Deloitte’s service includes a range of features, from transfer pricing planning and risk assessments via documentation assistance and audit defence to negotiation with the relevant tax authorities. “We try to provide security to the clients, to optimise their transactions by finding the most appropriate pricing and tax treatment,” says Loquet. “It is also about respecting the operational structure,” adds Rasch. “You are really looking at the business model.”

Potentially, transfer pricing will affect any company with interests outside Luxembourg, which by the very nature of the Grand Duchy’s corporate landscape. “Luxembourg is ideally situated for the transfer pricing business,” says Loquet. With some 1,400 transfer pricing specialists world-wide, Deloitte has developed an international network of experts with whom Rasch has regular meetings and conference calls to keep up to date with practices around the world.  Moreover the Deloitte website has a transfer pricing alert that will provide clients with flash news of developments in other countries and the company even issues a bi-monthly transfer pricing newsletter called, appropriately, Arm's Length Standard.