Classic TP solutions

A full range of solutions across the entire lifecycle

Reference Projects

Questro International provides a full range of transactional/functional transfer pricing solutions across the entire transfer pricing lifecycle. In this respect, we have worked on a broad spectrum of different transfer pricing projects. Below, we have listed a few reference project areas within which Questro professionals have recently completed client engagements as well as a Matrix outlining additional project expertise.

Cash Pools

Centralised management of excess liquidity is becoming increasingly important for Multinationals to decrease group funding costs. Also, operating companies should not have to allocate resources and maintain expertise in the area of funding. Typical transfer pricing challenges with cash pooling are that: independent parties do not engage in cash pools, thus, no transaction specific third-party comparables exist; neither the OECD’s Transfer Pricing Guidelines, nor local country guidelines across European jurisdictions, provide much useful guidance; and case law is very limited in this area and difficult to use.

Whilst independent parties do not engage in cash pools, comprehensive transfer pricing solutions in this area do exist, and the OECD Transfer Pricing Guidelines explicitly recognises at Para. 1.11 that the mere fact that a transaction may not be found between independent parties does not of itself mean that it is not arm’s length.

Questro International has worked on a number of client engagements regarding the establishment, documentation and defence of cash pools. Our solutions have included the following: remuneration of a cash pool leader’s functionality expressed in basis points of the loan volumes of the cash pool; additional compensation for any “risk taking” by the cash pool leader; benchmarking interest rates for deposits and advances determined with reference to a joint floating base rate, adding individual spreads as company specific risk premiums; and defending interest rates for cash pool participants against local tax authority challenge.

Depending on the specifics of a cash pool arrangement, a well thought through structure should also have policies for the investment of excess liquidity in the money markets as well as a transfer pricing policy for the sharing of returns on such money market investments.

Central Entrepreneur Models

Regional or global centralised business structures are increasingly common and are attractive if you can ensure the principal company possess the appropriate competences to manage the business and related risks. If such centralised business management can be implemented from an operational perspective, a number of cost savings can typically be achieved, and there are several tax optimal transfer pricing options available.

Typically a central entrepreneur acts as the Principal within the supply chain assuming central management of the supply chain and all major business risks and assets. The central entrepreneur operates via a network of low risk "helpers" such as:

  • Contract/toll manufacturers that manufacture on its behalf
  • Sales entities, typically limited risk distributors or commissionaires
  • Service and/or distribution centers remunerated on a cost plus basis

IP Assets

Branding fee
If marketing intangibles, (trade names and trademarks), are licensed (or used) within a group, a royalty should be paid by the licensee (or user). The professionals of Questro International have been involved in benchmarking branding fees in many industries and in setting detailed transfer pricing policies based on both benchmarks and the "value and usefulness of the intangible property". For example, this could mean that some licensees of a brand pay a limited or reduced royalty rate if the brand does not support their local business profitability while licensees in countries with large market shares and/or profitability attributable to the brand pay a higher royalty rate.

Trade intangibles
Where a corporate owns patents, know-how or other trade intangibles that are being licensed or used by other group companies, an arm’s length royalty rate should be charged for such use. Whilst charging for marketing IP is very common, we find many companies fail to fully charge for their technical IP and know-how between group companies. Benchmarking such technical royalty rates will also make it visible if R&D efforts on a "full cost basis" generate an appropriate return. A transfer pricing policy for the licensing of trade intangibles should be based on both benchmarks and "the value and usefulness of the intangible property" to the licensee.

Project Expertise