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On the Elusive Implications of Group Synergies for Transfer Pricing: The Elephant in the Room
28 December 2023
Dr. Ronald Bernstein and Dr. Yves Hervé
The OECD transfer pricing guidelines have long been largely mute on the subject of group synergies, and transfer pricing practitioners have mostly adopted an approach of benign neglect to the matter, rather than attempting to internalize the impact of group synergies within the transfer pricing methods they apply. In this article, Principal Dr. Ronald Bernstein and Senior Managing Director Dr. Yves Hervé investigate whether and how group synergies at the cost level impact conventional transfer pricing methods. They find that the cost-plus method and the transactional net margin method may not lead to appropriate outcomes when group synergies are not accounted for by comparability adjustments. The authors also show how comparability adjustments can be performed and provide some ideas on how to quantify certain types of synergies in practice.