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Tax Provision, Transfer Pricing

Tax Resolutions for 2023

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Checklist Writing Notice Remember Planning Concept,home office desk background,hand holding pen and writing note on wood table.

A new year always begins with a few good resolutions. But we weren’t interested in the usual diet and exercise promises—we wanted to see how tax executives will be upping their games in 2023. So, we asked clients and a few of our own experts about their professional new year’s resolutions and here we’re listing a few of the best.

No More Surprises at SAE Power, Inc.

My 2023 New Year’s resolution: Minimize the surprises to our shareholders. If you have a CFC (controlled foreign corporation), think about your shareholders! If your company is subject to ups and downs for net income each year, then the GILTI tax, or tax on global intangible low-taxed income earned by a foreign affiliate of a U.S. company, can catch you off guard. This tax went into effect in December 2017 but does not apply when you have a net loss for the year. If you have income in the next year, the net loss from the prior year does not carry over and your shareholders will get caught holding the bag.

This happened to us for our FY2021 returns (completed in 2022) when in the prior years we had a net loss when taxable income for all foreign subsidiaries was combined. In FY2021, we had net income subject to the GILTI tax and did not find out about it until the extended due date of the returns. We now know that this must be monitored, especially as we get closer to the year end. We may not get the tax returns prepared before the individual tax due date, but we can certainly give the shareholders a “heads-up” as to whether or not it applies and an estimate.

And, oh, speaking of transfer pricing, make sure that you have your transfer pricing reports for each country in order and sent off to your auditors within a reasonable amount of time. Cross those T’s and dot those I’s! Happy New Year!

Linda Chisum

CFO, SAE Power, Inc.

K.I.S.S.: Keep It Super Simple Advises XBS

Transfer pricing regulations have already gotten more complicated, and in anticipation of more changes as a result of the UN’s additional practical guidance for developing countries and the OECD’s work on BEPS 2.0, this is the time to simplify, communicate, and document.  Align and coordinate with your foreign colleagues if you are decentralized, defend your position with a good narrative, and create a checklist to ensure you’ve addressed each required component.

Mimi Song, Exactera

Proving Out Deferred Balances Advises XBS

When it comes to the tax provision, a great new year’s resolution is to prove out your deferred tax balances. The key is to draw a line in the sand and take a good, hard look at your ending deferred balances.  Don’t just roll forward your deferred balances year after year, as there could be issues with the beginning balances—or even a calculation or adjustment running through this year.  Instead, review your ending deferred balances closely—prove out each one by comparing your net tax value of the item to the net book value and comparing it to the gross ending balance.  And for any attributes, be sure to compare the balances to a supporting schedule, such as a carryforward schedule attached to your most recent tax return.

Howard Telson, XBS

Jaggaer Will Move up Deadlines

My constant resolution is to make our tax department one that consistently utilizes best practices to efficiently prepare our work, reduce taxes, and provide value to the company.

In terms of transfer pricing, I’d like to efficiently provide our financial information faster, so we get our documentation prior to return deadlines. This year our plan is to close the year-end a month sooner and it’s my hope that the global controllers can provide our financial data at least a month earlier.

Angela Griffin, Jaggaer

Due Diligence on Intercompany Agreements at XBS

For 2023 I recommend that tax departments at MNEs review and ensure that all intercompany transactions are governed by intercompany agreements, that all terms and conditions of these agreements provide an accurate reflection of the underlying intercompany activity, and that the pricing mechanism is aligned with the company’s business and operating model.

Hasker Hoogenberg, XBS

GOAT Group Will Turn Back the Clock on Transfer Pricing

For 2023, my transfer pricing resolution is going to revolve around reviewing our company’s legacy transfer pricing studies. We noticed that one particular group of regional entities had additional intercompany activities that were missed in the prior years. This has been causing some headaches, especially around intercompany balances. In 2023, we hope to leverage XBS to take a more holistic approach to our transfer pricing activities, which would help alleviate any cash or intercompany issues that we faced in 2022.

Matthew A. Capasso

Senior Tax Manager, GOAT GROUP

Red Ventures Chooses Automation

Given the economic head winds that have impacted all companies in 2022, and the reduction in budgets and personnel, as tax professionals, we need to ensure that we look at 2023 through a different lens.

At the Red Ventures Tax Department, our 2023 resolution is to look at all our tax processes/functions with an eye on automation. This isn’t limited to our tax preparation process but should touch all data inputs and outputs regarding our entire tax department. Our 2023 automation KPI effort will drive huge efficiencies within our tax team, so that we can continue to focus on high-value tax projects.

Raymond Salort
VP Taxes, Red Ventures

Review Intercompany Agreements

For 2023, a great transfer pricing resolution is to gather and review all your intercompany agreements to see which companies they represent, which officers signed the agreements, and if the agreements align with your polices and contain the correct procedures for effectuating same. Often, not all participants have current in-force agreements in place, and in some cases, the agreements themselves are inconsistent with current procedures. The mismatch between agreements and policy could cause problems during an audit. Far better to have these in place now rather than a fire drill later.

Michael DeSimone, XBS

Check Margins Against Transfer Pricing Policies

One new year’s resolution I recommend is to check your entities’ margins monthly to ensure that they are tracking against your transfer pricing policies. You don’t want an unwelcome new year’s surprise at year-end when you close your books.

Andrei Enoiu, XBS

Synergize the Group

For 2023, a wise transfer pricing resolution is to synergize the group. Improve the flow of information within the group so all entities could both contribute to and benefit from consistency. Share individual entity experience in an efficient way to make sure that your transfer pricing policy aligns not only with the global perspective but also with the local rules and requirements. Recently, some approaches that seem to be well recognized by the tax authorities in one country, may occur to be a boiling point in another. The aim is to find the golden mean that will be OK for all parties of the transaction and their tax authorities. And that is possible only through synergy. Together, you are stronger!

Milena Kaniewska-Srodecka, XBS

Happy New Year and best wishes for a productive and prosperous 2023!