The EdgarStat Blog explores issues in transfer pricing and application of the transactional net margin method (TNMM or CPM in the US) and other enterprise profit-based methods.
Transfer pricing practitioners in the US as well as in other nations often face the dilemma that clients wish to establish intercompany management fees as a percentage of revenues while tax authorities may test the implied cost plus from any intercompany management policy.
Topics: Intercompany Services Management Fees CUP State Transfer Pricing TNMM/CPMRead more
One of the most challenging transfer pricing issues regarding financial transactions is making a comparability adjustment for differences in country risk between the tested non-US borrower’s country and the comparable US borrower's country in pricing the intercompany loan interest rate.
Topics: CUFT State Transfer Pricing Adjustments Intercompany Financing Arm's Length Interest RatesRead more
Applied properly, the Comparable Profits Method (CPM) can be a useful approach for well-defined transfer pricing issues, such as the appropriate profitability of a sales affiliate. Unfortunately, CPM is often applied mechanically without regard for economic principles and functional comparability.
Topics: Benchmarking Profit Indicators Tax Policy State Transfer Pricing TNMM/CPMRead more
A recent article asserted that state tax authorities should use the Comparable Profits Method (CPM) with care in the evaluation of transfer pricing for tangible goods. However, some of the examples cited, including the recent Coca Cola case, in their piece are misplaced for reasons we will address.
Topics: Tax Policy State Transfer Pricing TNMM/CPM Tax ControversyRead more