Background
Our Client is a multinational technology start-up that operates in the Healthcare Information Technology industry.
The Client engaged Grant Thornton Singapore to review its existing inceptive transfer pricing (“TP”) policies and provide recommendations on alternative TP policies.
Client Challenges
Compliance with multinational transfer pricing guidelines
The Client had entities operating in Singapore, Philippines, Indonesia serving end-users largely within South East Asia. The Client wished to establish a TP policy that is consistent with the Organisation for Economic Co-operation and Development principles and meets the local TP rules in jurisdictions the Group operates in for the best implementation.
Determining the market value of similar services
The Client needed objective and reliable data showing how other companies priced similar services in the open markets of each jurisdiction.
Applicable long-term strategic policy
The Client’s business was picking up quickly and the management planed to expand the activities to other countries in the region in years to come. The Client were desirous of putting in place an appropriate pricing structure which could be easily leveraged for their proposed set ups.
Our Solutions
Designing appropriate Model
We assisted the client design appropriate operating models that could be adopted across multiple jurisdiction which was consistent with their commercial objectives. The design included articulation of the operating structure, the modus operandi, substance tests and the flow of revenues amongst the affiliate entities.
Consideration of the value chain analysis
For the selected model, we conducted an analysis of functions, assets and risks to identify and characterize the Client’s intercompany transactions and relevant parties.
Economic analyses
We proposed an appropriate range of pricing policies for intercompany transactions (e.g. the software development services and distribution activities) through comprehensive economic analyses.
The Outcome
We identified potential risks and gaps of the current TP model and recommended two new models. Our TP planning study on the new models gave the Client clear and effective guidance to proceed with not only their existing but future operations in multiple jurisdictions.
We also assisted the Client in implementing the recommended transfer pricing models / strategies.
