Industry Solutions

Significant TP experience across many industries

Our Experience

Questro professionals have significant TP project experience across many industries.

During the last 12 months we have worked extensively within the "Real Estate" and "Commercial & Industrial" industry segments, which are highlighted directly below. Further TP specific industry insights are highlighted in the Matrix below. If your company does not belong to any of the listed industries, please contact us to learn how we can assist you and our specific experience in your industry.

Real Estate

Investment in real estate often involves a number of investments, structured in a somewhat similar fashion. Real estate investment therefore lends itself to designing and implementing group wide transfer pricing policies for interest rates, finance companies, holding companies, profit-participating loans etc. at an early stage of making investments. The transfer pricing issues to be addressed typically include:

Investment advisory services
Setting interest rates on subordinated loans, including quantification of the subordination risk premium
Setting fixed and variable interest rates on profit-participating loans
Defining margins for holding companies and finance companies
Cost allocations for centralised support activities
Fair market valuation for inter-company transfers of real estate
FOREX risks

 

Risk premiums for subordination require special consideration. The general approach of credit rating agencies of adjusting subordinated debt down by one notch for investment grade and two notches for junk grades from the senior rating might underprice subordination risks. The approach developed by Questro International combines bond market data, commercial real estate loan data, and industry data to calculate the subordination margin (in basis points) over senior debt. Depending on the facts and circumstances of the inter-company loan, subordination risk margins range from 95 bps to 400 bps.

Margins for holding and finance companies should typically address the market and FOREX risks involved, the amount of funding provided or the amount of investment made.

Once a real estate investment structure is established, the ongoing management of the structure will often involve a significant number of transfer pricing related documents due to the large number of legal entities involved. Questro International provides a software solution - TP Controller - that can manage all transfer pricing documents, valuation reports, as well as keeping track of renewal of inter-company agreements for structures involving up to 2000 legal entities.

Commercial & Industrial

Companies operating in the commercial and industrial space (i.e. business to business sales of semi-finished raw materials, components, machinery, technology, or technical services) form a large sub-set of Questro International’s client base.

Such companies undertake a wide variety of transfer pricing projects, however, in recent years we have seen a focus on transfer pricing projects that seek to create innovative internal transfer pricing models that create the right management incentives within the business. Historically, transfer pricing projects in this industry were often driven by short-term tax planning priorities and such models created asset allocation distortions over time. In reverting to a more neutral transfer pricing models based on transparent external market pricing, companies are able to eliminate inherent subsidies and penalties in their TP models (often  compensated for later by a series of complex discount or rebate policies). This can result in significant cost savings and in some cases, the new TP model has even helped to drive third-party sales, given increased "end to end" pricing visibility across the supply chain.

TP industry insights