Develop, implement, and document a transfer pricing policy for headquarters services

ObjectiveDevelop and implement a transfer pricing policy for headquarters services to avoid annoying pricing discussions, re-focus management on the market, and reduce tax exposure
FunctionProject manager directly reporting to the steering committee
CountriesUSA, Hong Kong, Macao, Japan, UK
ProfileA major UK-based telecommunications group rendered a wide range of central services to its subsidiaries around the world. The corresponding pricing led to controversies.
FocusA detailed service related functional and risk profile was developed. The cost plus method (using TNMM) was selected as appropriate transfer pricing method.
A management service agreement specifying the services rendered, the benefits provided, and the resources employed was drafted.
The range of services was presented to and discussed with regional management; services not deemed beneficial (e.g. publication of work) were eliminated from the final contract.
Management presentations / discussions were held to develop and implement the policy.
ResultThe standardized procedure replaced the regular controversies. Management was re-focused on increasing the group s market share. The tax exposure was reduced significantly.

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