Transfer Pricing

[Siraj Shaikh]

I am selling to an Associated Enterprise ( my distributor in USA )a newly launched Product. My distributor wants me to sell them at  a dicsounted price, ie., i am recovering only the variable cost + some portion of overheads. and no profit at all.

What type of Transfer Pricing issues are going to arise in such transaction?????

URGENT

AI Summary

Transfer pricing scrutiny arises when an associated enterprise is charged only cost; benchmark pricing and documentation required.
Sale to an Associated Enterprise at cost plus overheads with no profit attracts Transfer Pricing scrutiny; contractual terms and evidence of repatriation may support genuineness, but product level profitability tests can trigger enquiries. If identical sales to independents exist, apply the CUP principle; otherwise obtain market rate benchmarks and maintain contemporaneous documentation and repatriation evidence to justify the pricing.