Barnes Dennig Transfer Pricing After Tax Reform and COVID-19 120920 - BD | Page 16
BENCHMARKING STUDY – AN ALTERNATIVE TO DOCUMENTATION ?
TP Economic Analysis
• Benchmark profit margin target for subsidiary
Benchmark Company for Subsidiary
EBIT / Sales
• Lower risk situation / fewer resources required
• Often used for establishing transfer prices with new US or foreign subsidiaries
Example :
Adjust transfer prices to reach EBIT margin * between 5.0 % to 8.2 % for subsidiary
Company A |
16.3 % |
Company B |
12.8 % |
Company C |
8.2 % |
Company D |
6.3 % |
Company E |
5.5 % |
• Effectively the CPM / TNMM approach Company F 5.0 %
* Earnings before interest and tax as a percentage of revenue
Company G 0.3 % Company H ( 3.2 %)