Page 71 - Strategic Tax Planning for Global Commerce & Investment

Strategic Tax Planning for Global Commerce and Investment

2. Contractual Terms – The following contract
terms may have to be adjusted for:
 Warranties provided

 Sales or purchase volume
 Credit terms
 Transport terms
3. Sales, Marketing, Advertising Programs –
Adjustments must be made for sales, mar-

keting, advertising programs, promotional
programs, rebates, etc.
4. Level of the Market – Adjustments may
have to be made to adjust the level of the
market, for example, whether retail or
wholesale.
5. Foreign Currency Risks.

Accounting Consistency

The resale price method requires that accounting practices be
consistent between the controlled transaction and uncontrolled
comparables. Absolute accounting consistency is not required.
Differences are acceptable as long as the differences are
accounted for, but differences that materially affect the gross
profit margin affect the reliability of the result.

Example:

Computing the Profit Margin

A controlled enterprise sells property to a reseller, also a
controlled entity. The reseller in turn resells the property to
customers that are uncontrolled entities. The resale price for

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