There are new clarifications on transfer pricing
The Ministry of Finance has issued new Tax Explanations. This time they concern the resale price method (MCO).
MCO is one of the five methods to be considered first when verifying transfer pricing. Only when it is not possible to apply any of these five methods, it is possible to use another method, the Ministry of Finance emphasises in its document.
– Recall that MCO consists in calculating the purchase price of a good or service from a related party by reducing the sale price of that good or service to an unrelated party by the resale price margin, explains Cyprian Werykowski, tax adviser, director at Thedy & Partners.
The resale price margin, which is determined when calculating the purchase price of a good or service from a related party, should ensure: the coverage of direct and indirect costs, related to the resale of the subject of the controlled transaction; a profit appropriate to the functions performed by the entity, the assets involved and the risks incurred.
As the MF emphasises, in order to apply MCO, it must be determined whether it is the most appropriate method in the circumstances, taking into account, in particular: the conditions that have been agreed or imposed between related parties; the availability of the information necessary for the correct application of the method; and the specific criteria for its application. Importantly, the application of MCO involves the following steps:
– determination of the selling price and the resale price margin;
– calculation of the purchase price (i.e. the price of the controlled transaction);
– selection of a financial indicator;
– calculation (calculation) of the selected financial indicator;
– comparison of the financial indicator and verification that the purchase price has been set at the market price.