Defensible intercompany pricing for groups that operate across borders.
Transfer pricing is the pricing of goods, services, loans, intangibles and other transactions between related entities of the same group, such as a parent company and its subsidiary in another country. Tax authorities expect these prices to follow the arm's length principle: they should match what unrelated parties would have agreed in comparable circumstances. Documenting how you reached that price is what protects you in an audit.
When related companies in different countries trade with each other, the price they charge decides how much profit is taxed in each country. That is why tax authorities examine these transactions closely, and why a position you cannot support on paper is a risk.
M2K Advisors helps multinational groups set, document and defend their intercompany pricing. We support clients across the globe, so one team can keep your approach consistent in every country you operate in.
The written record that shows your intercompany prices are at arm's length, prepared to each country's rules and filed on time.
An analysis of who does what, which assets they use and which risks they bear, followed by benchmarking against comparable independent companies.
An agreement with the tax authority on your pricing method for future years, so the position is settled before an audit can start.
Representation when a tax authority questions your pricing, from the first notice through appeal and, where relevant, treaty relief.
The related-party dealings our team prices, documents and defends.
Purchase and sale of raw materials, components and finished products between group entities.
Management, IT, HR, finance and other shared services charged within the group.
Licensing of brands, technology, know-how and other intellectual property.
Interest rates on group loans, guarantees and cash-pooling arrangements.
Entities that manufacture or develop products on behalf of a group principal.
Transfers of functions, assets or risks between group entities.
Transfer pricing is how related companies in a group price transactions between themselves, such as goods, services, loans, royalties and management fees. Tax authorities require those prices to be at arm's length, meaning what independent parties would have agreed.
It is the global standard that related parties should price their dealings as if they were unrelated. If a price differs from what independent parties would agree, the tax authority can adjust the profit and tax it accordingly.
Any entity with related-party transactions above its country's thresholds. The limits and forms differ from country to country, and we confirm what applies to each of your entities.
The commonly accepted methods are Comparable Uncontrolled Price, Resale Price, Cost Plus, Transactional Net Margin and Profit Split. The right choice depends on the transaction and the data available for comparison.
An APA is an agreement between a taxpayer and a tax authority that fixes the pricing method for future related-party transactions over a set period. It gives certainty and reduces the chance of a later dispute. It can be unilateral, bilateral or multilateral.
The tax authority can adjust your profits, charge additional tax and interest, and levy penalties. The same profit can also end up taxed in two countries, which is why documentation and, where suitable, an APA or MAP matter.
MAP is a process under a tax treaty in which the tax authorities of two countries negotiate to remove double taxation caused by a transfer pricing adjustment.
Documentation is normally prepared every financial year, because the rules and thresholds apply annually. Benchmarking data is often refreshed on a cycle, with the analysis rolled forward in between.
Yes. We work with clients across the globe, so your approach stays consistent across the group and your filings are coordinated by one team.