Transfer Pricing in One Lesson (eBook)

Foreword 6
Contents 9
About the Author 10
Chapter 1: Introduction 11
Chapter 2: The Lesson 13
2.1 Developing a Broad Understanding of the Relevant Economic Conditions for Your Transactions 16
2.2 Functional and Risk Analysis: Heart and Soul of Transfer Pricing 21
Functions 25
Research and Production 25
Procurement 25
Quality Assurance 25
Logistics and Warehousing 26
Sales and Marketing 26
After-Sales 26
Management and Administration 26
Risks 27
Research and Development Risk 27
Product Liability and Quality Risk 27
Market Risk 28
Customer Credit Risk 28
Functional and Risk Profile 28
Chapter 3: Applying the Lesson to Basic Transactions 35
3.1 The Comparable Uncontrolled Price (CUP) Method 38
3.2 The Resale Price Method 45
3.3 The Transactional Net Margin Method (TNMM) 61
3.4 The Profit Split Method (PSM) 74
Scenario (a): Prima Asia as ``Super Distributor´´ 83
Scenario (b): Merger with Rothwell Gornt 88
3.5 The Cost Plus Method (C+) 90
Chapter 4: Applying the Lesson to More Complex Transactions 101
4.1 Management Services 102
4.2 Financial Transactions 115
Chapter 5: Documentation and Tax Audits 127
Chapter 6: Closing Remarks: A Kind Word to Tax Auditors and Policymakers 132
Annexes 135
Annex A. Questionnaire: Transfer Pricing Basics 135
Identification of Relevant Facts and Circumstances 135
Annex B. Checklist for Benchmark Studies 136
Guidance for Integrating Benchmark Studies into the Local File 136
Commissioning a Local Benchmark Analysis 138
Annex C. Application of a CUP License Fee: Case Study Variation for Prima Asia 139
Bibliography 144