The Profit Split Method (PSM) is one of five OECD-recognized transfer pricing methods. It identifies the combined profits from controlled transactions and allocates them between related parties based on their contributions. It applies most appropriately when both parties make unique contributions, share significant risks, or operate in highly integrated structures. How to Apply the PSM:
The Transactional Net Margin Method (TNMM) benchmarks a tested party’s net profit margin against comparable independent companies. It is the most widely used transfer pricing method globally. It works best for routine entities such as distributors, contract manufacturers, and service providers. When a multinational group prices transactions between related parties, tax authorities require those prices
The resale price method (RPM) is one of three traditional transaction methods under the OECD Transfer Pricing Guidelines. It works by deducting an arm’s length gross margin from the resale price charged to an independent customer. The result is the arm’s length transfer price for the original intercompany transaction. What Is the Resale Price Method?
The Cost-Plus Method in Transfer Pricing: What It Is and When It Actually Applies What Is the Cost-Plus Method? The Cost-Plus Method is one of five OECD-recognized transfer pricing methods. It determines an [arm’s length price] by adding a gross profit markup to costs. The starting point is the supplier’s cost of sales. The markup
Cost Plus Method in Transfer Pricing: When and How to Apply It The Cost Plus Method sets a transfer price by adding an arm’s length markup to the supplier’s relevant costs. It works best for routine manufacturing, supply, and service transactions. The tested party must have a clear functional profile, reliable cost data, and a
Recessions affect the economy in many ways, directly influencing consumer demand, global supply chains, and, notably, transfer pricing (TP) practices due to losses and changeable risk profiles, making it harder to apply standard pricing methods in cross-border transactions. When the market experiences a downturn, multinational enterprises (MNEs) often face challenges across their value chains, with
It depends. Some countries ask for the local file preparation if there are transactions, no matter the value of them, some ask only if the transaction or entity exceeds a set threshold. To understand if you need to have a local file documentation, you need to consider a few main aspects:
Global minimum tax is an OECD initiative introduced as a part of the BEPS program. The idea behind this initiative is to ensure that big multinational corporations are taxed at an effective tax rate of at least 15%. Most countries added this initiative to their local legislation. The entry into force date varies among the countries, for example, the EU has implemented the regulation from January 2024.
Amount B is a part of Pillar One from the OECD BEPS program. The purpose of Amount B is to act as a safe harbor for baseline marketing and distribution services.
Currently, the future of Amount B isn’t clear. As its implementation is optional, some countries including Germany and the Netherlands, already announced that they aren’t going to implement it.
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