Consultations on the clarifications on the resale price method have started
The Ministry of Finance has launched consultations on the draft tax explanations in the field of transfer pricing. This is the ministry's sixth clarification in the field of transfer pricing and it will concern the resale price method.
As the MF emphasises, the explanations are to indicate the practical aspects related to the application of the resale price method. The explanations will include: the scope of application of the method, the method of selection of the audited entity, determination of the margin of the resale price and calculation of the purchase price, the method of selection of the profitability ratio, criteria for comparability of transactions and entities.
– The draft explanations remind that the resale price method (RPM) consists in calculating the purchase price of a good or service from a related party by reducing the sales price of that good or service to an unrelated party by the resale price margin. In determining the resale price margin, the taxpayer may take into account all factors and costs that affected the value of the item being resold (including finance costs). The resale price margin is understood as the gross margin on sales – notes Cyprian Werykowski, tax adviser, director at Thedy & Partners.
So when will MCO be applied? The MF suggests that this method should be applied in particular when:
– the comparable uncontrolled price method cannot be applied,
– the subject of the controlled transaction has been resold in a short time interval to an unrelated entity,
– the object of the uncontrolled transaction (resale transaction) has not changed significantly.
The draft clarification of the MF is 23 pages long. Consultations on it will last until the end of April.