Implementation of profit splits

30 April 2016
By Philip de Homont and Alexander Voegele

In the seventh of a series of articles in International Tax Review on intangibles, NERA Principal Philip de Homont and Affiliated Consultant Dr. Alexander Voegele describe how to implement a profit split system.

The article, “Implementation of profit splits,” which appeared in the April 2016 issue of the tax magazine provides an overview of the steps needed to implement the complicated system, and the benefits of its use.. The profit-split system reduces the potential for issues with tax authorities. And it reduces the effective tax rate; deferred taxes can be booked again, and cash tax payments diminish. The system is easy for the company to handle: transfer prices are set and updated automatically on a monthly basis and can be handled by existing accounting systems.