Transfer Pricing 101
An introduction
Verse Consulting LLC
September 2009

What is transfer pricing?
• Transfer Pricing refers to the pricing of transactions
by and between members of the same organization
Example.
Example ABC Company’s corporate headquarters in the U.S. provide
Company s US
accounting, payroll and management services to its subsidiaries in Canada
and Mexico.
Example. DEF Company manufactures goods in Taiwan. The goods are
sold b th T i
ld by the Taiwanese manufacturing division t th U S sales and
f t i di i i to the U.S. l d
marketing division which sells them in North America.
• Based on the internationally recognized and
accepted “Arm’s Length” Principle
Associated enterprises must deal with each other as if they were
independent, third parties, i.e., at “arm’s length.”

Why does transfer pricing matter?
• Typically market forces establish prices for goods
and services, i.e., invisible hand.
• I the case of transactions within a company th
In th ft ti ithi the
prices are controlled by the organization not market
forces.
• Fiscal authorities around the world have established
rules and enforcement schemes to prevent
multinational enterprises from using transfer prices
on cross-border transactions to artificially reduce
taxable profits in their jurisdiction.

How does transfer pricing affect you?
• Transfer pricing determines how profit is split
between related parties.
Due to different tax rates transfer prices influence the total tax burden of a
group of companies.
• Transfer pricing effects other regulatory reporting.
How goods and services are charged between related parties has
implications for the reporting of VAT, customs and other filings.
• Transfer pricing is seen by many tax authorities as a
way to raise revenue and close budget deficits
deficits.
Audits and penalties related to transfer pricing are on the rise around the
world.

Questions to ask
• Are you aware of the full breadth and scope of your
related party transfers (tangibles, intangibles,
services)?
• Do you anticipate any international acquisitions,
mergers, divestitures or reorganizations in the next
g g
12 months?
• Are you prepared to respond to a tax authority’s
request for transfer pricing documentation?
• Is your tax structure aligned with your business
operations and strategy?
p gy

Contact us
Verse Consulting LLC
1200 Smith Street, Suite 1600
Houston, Texas 77002
713-353-3964 (main)
713 353 4601
713-353-4601 (fax)
info [at] verseconsulting [dot] com

The Fine Print
• Not to be repurposed or sold.
• This presentation is provided for information purposes only and
is not intended to constitute tax advice which may be relied
upon to avoid penalties under any federal, state, local or other
tax statutes or regulations, and do not resolve any tax issues in
your favor.
Upon request, we can provide you with express written tax advice
after necessary factual development and subject to such conditions
and qualifications as we may deem appropriate under the
circumstances.
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