A Market-Based Approach for Tangible Property Transfer Pricing
16 March 2005
By Dr. Richard Rozek et al.
Several recent high-profile tax controversies have prompted multinational companies to review their transfer pricing practices to ensure that the methodologies employed and associated documentation are consistent with applicable tax guidelines. Identifying the most appropriate data and applying the proper transfer pricing method reduces the risk of costly defenses, penalties, and/or double taxation.
The authors suggest that multinational companies apply the Resale Price Method when they have negotiated agreements with third parties to perform marketing activities and prepared reliable, contemporaneous financial analyses. This approach enables the multinational companies to measure the value of their intercompany transactions in terms of their own market-based transactions. The authors illustrate their approach using a hypothetical intercompany transaction involving the transfer of tangible property to a marketing entity that bears costs and risks.
This article appears in the 16 March 2005 edition of BNA Tax Management's Transfer Pricing
Report, Volume 13, Number 21, and has been reprinted with permission from The Bureau of National Affairs, Inc. Copyright 2005.
