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Commercial and Practical Lessons in Transfer Pricing
Transfer pricing impacts many areas of multinational business. A sound transfer pricing policy is one that balances available resources against materiality and risk, identifies planning opportunities and ensures that the commercial drivers of the business are respected and preserved. Taxand UK looks at these three key elements of transfer pricing policy in turn.
- Allocate resources commensurate with risk
- Identify planning opportunities
- Commercial drivers of the business
Transfer pricing impacts many areas of multinational business. A simple cost-plus methodology can provide useful information to the business with respect to cost recognition. A return on sales methodology can lead to revenue enhancement by incentivising employees.
Transfer pricing policy should always be developed with the commercial drivers of the business in mind. A risk-based approach to compliance coupled with an ongoing review of legitimate tax planning opportunities will provide a strong base for a transfer pricing policy that will maximise shareholder value and generate cash for the business.
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Accreditation: First published in Tax Journal, September 2010