TRANSFER PRICING CASE STUDIES WORKSHOPSAN JOSE 31 MARCH - 4 APRIL 2014 5-a. Case Study - Cutting Edge Corporation OECD freely authorises the use of this material for non-commercial purposes. All requests for commercial uses of this material or for translation rights should be submitted to email@example.com. The opinions expressed and arguments employed herein are those of the author and do not necessarily reflect the official views of the OECD or of the governments of its member countries.
Tax planning using havens or preferential regimes • Advantages of havens for tax planners • Low or no tax for international companies (deferral) • No transparency • No exchange of information • Characteristics of preferential regimes • low tax by sector (financial/distribution/communication) • low structural costs - premises, staff etc. • special incentives
Cutting Edge Group The Cutting Edge group develops, manufactures and sells electronic diagnostic equipment used by the medical profession. The group consists of two companies: In Country A: • Cutting Edge Corporation: (“CE Corporation” or Parent Company) In Country B: • Cutting Edge (B): (“CE (B) Ltd.” or Subsidiary)
Cutting Edge – Key Facts • The parent company, CE Corporation, is resident in Country A, where it has an R&D facility, a manufacturing facility and a domestic sales division. • It has one subsidiary, CE (B) Ltd, resident in Country B, which carries out a sales/distribution function.
CE Accounts 2009 You are provided with the 2009 accounts for the two companies. On the assumption that you are an auditor in Country A: • What do you think will be the main international tax risk? • What further information would you ask for at this stage?