Synergies are closely associated with the very existence of firms, especially multinational enterprises (MNEs). The arm’s length principle implies that, in transactions among related parties, all transferred value has to be compensated, including the value of synergies. Yet, transfer pricing regulatory guidance provides remarkably little direction on dealing with the synergies most MNEs possess.

On 26 February, Senior Managing Director Yves Hervé, Managing Director Vladimir Starkov, and Principal Ronald Bernstein spoke at the WU Transfer Pricing Workshop “Can Transfer Pricing Handle Group Synergies?” moderated by WU Transfer Pricing Center Managing Director Raffaele Petruzzi. The NERA presenters discussed methods that explicitly take into account the effect of synergies in controlled transactions and allow to calculate the boundaries of arm’s length solutions. These methods can inform transfer pricing policies for MNEs as well as be used by taxpayers and tax authorities for the resolution of tax controversies and to guide negotiations of bilateral and multilateral tax agreements such as advance pricing agreements (APAs) and mutual agreement procedures (MAPs).