Does your profit sit where your value is created?
Most CFOs know where their group makes money. But does the legal-entity profit allocation reflect how the business actually creates that value?
Transfer Pricing 360° is a short economic reality check.
Just one question
Does your transfer pricing tell the same economic story as your business?
What really drives profit in your group?
Before thinking about legal entities or transfer pricing policies, think about the business itself. Which activities are responsible for creating your group’s economic value? Select up to eight that matter most.
Think economics first. Legal entities come later.
The next question is not “Is our transfer pricing wrong?”
It is: “Can we explain why our profits are allocated this way?”
Your assessment brings together three perspectives: value creation (where you believe the group’s economic value is created), profit allocation (where profit actually arises across the legal entities) and the gap (where those two views do not immediately align).
Possible explanations may include
- ownership and development of valuable intangibles;
- economically significant risks and who controls them;
- entrepreneurial versus routine functions;
- contractual arrangements;
- market-specific circumstances;
- temporary losses or exceptional costs;
- financing;
- differences in accounting;
- existing transfer pricing policies; or
- a transfer pricing model that has not evolved with the business.
Could you explain the result to your Board, or to a tax authority?
If the answer is immediately clear, that is useful confirmation. If the answer requires some thought, that is exactly what Transfer Pricing 360° is designed to uncover. Because transfer pricing should ultimately connect:
- Business model
- Value creation
- Functions, assets & risks
- Legal entities
- Profit
Let’s discuss your TP 360° result
A 30-minute CFO conversation can help explore the largest differences between your economic view of the business and the actual allocation of profit.
- No commitment.
- No immediate documentation exercise.
- No 100-page transfer pricing report.
First, we understand the business. Then we determine whether anything warrants a closer look.
Discuss my TP 360° resultWhat happens next?
If a gap deserves further investigation, we can progressively test the explanation against:
- Economic realityHow does the business actually create value?
- Functions, assets and risksWhat do the relevant entities really do, own and control?
- Transfer pricing policyDoes the existing model reflect that reality?
- Financial outcomesDoes the policy produce results consistent with the model?
- External evidenceWhere relevant, do benchmarks or other economic analyses support the outcome?
Only then can conclusions be drawn about the transfer pricing position.
Transfer Pricing 360° is a conversation and diagnostic tool, not a transfer pricing method or arm’s-length analysis.
The “implied economic margin” reflects only the assumptions entered by the user. It does not determine an arm’s-length remuneration and does not replace a functional analysis, DEMPE analysis, risk-control analysis, benchmarking study or the application of an appropriate transfer pricing method.
Its purpose is much simpler: to identify the questions worth asking before commissioning the answers.
Transfer Pricing 360° · Business first. Tax second.
Does your profit sit where your value is created?
Important notice
Transfer Pricing 360° (the “Tool”) is provided by TaxModel Services B.V. (“TaxModel Services”, “we”) for general information and illustrative purposes only. It does not constitute tax, legal, accounting, transfer pricing or other professional advice, and should not be relied upon as such. Use of the Tool does not create a client relationship or engagement between you and TaxModel Services. Professional services are provided only under a separately agreed and signed engagement letter.
The results, including any “implied economic margin” and “gap”, are indicative only. They are generated automatically from the assumptions you enter and a simplified, top-down allocation. They do not constitute a transfer pricing analysis in accordance with the arm’s length principle, the OECD Transfer Pricing Guidelines or any national legislation, and do not take into account a functional analysis, DEMPE analysis, risk-control analysis, comparability analysis, benchmarking, contractual arrangements, specific facts and circumstances, or the positions of any tax authority. The results must not be used for the preparation of transfer pricing documentation, tax returns, financial statements, advance pricing agreements, tax audits or any other filing, disclosure or decision without obtaining specific professional advice.
The Tool is provided “as is” and “as available”. While we have taken care in developing it, we make no representation or warranty, express or implied, as to the accuracy, completeness, reliability, suitability or timeliness of the Tool or its results. Tax laws, regulations and their interpretation change frequently and may have retroactive effect.
To the fullest extent permitted by law, TaxModel Services, its directors, employees and associates accept no liability and assume no duty of care for any loss or damage, whether direct, indirect, incidental or consequential, arising from the use of, or reliance on, the Tool or its results.
Calculations take place entirely in your browser; no data you enter is stored by or transmitted to TaxModel Services. We nevertheless recommend that you use fictitious or anonymised names and do not enter confidential, price-sensitive or personal information.
This notice and any use of the Tool are governed by the laws of the Netherlands. Any dispute shall be submitted exclusively to the competent court in ’s-Hertogenbosch (Rechtbank Oost-Brabant).
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