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Transfer Pricing

The move towards centralized manufacture and distribution places a greater emphasis on inter-company activity, and in particular the evaluation of a transfer price, in order to control tax liabilities. Virtual Trader’s inter-company solution addresses this need with a comprehensive suite of functionality around the control of transfer pricing.

Each mode of evaluating a transfer price is defined in Virtual Trader by a ‘Pricing Method’. This defines all the aspects of that pricing method:

  • The basic value (e.g. ‘list price’, ‘item cost’)
  • Identification of a rate set if rates are required (e.g. ‘discounts’ rate set)
  • Definition of how the rate is to be selected (e.g. ‘product family’, ‘sales channel’)
  • Definition of how the transfer price is evaluated (e.g. ‘list less’, ‘cost plus’)
  • Selection of the transfer price currency (e.g. partner’s trade currency)
  • Definition of the currency conversion parameters (e.g. corporate, spot etc.)

All the common pricing methods are provided as standard, however Virtual Trader also allows the client to create their own unique pricing methods as well.

The key to success however is the flexibility with which the client can control which pricing method is used for each business scenario. The trading relationship and transaction type are used as standard, but the client can reference almost anything else about the transaction in order to decide the pricing method to use, such as order type, sales channel or country of sale etc.

This can be used to select a transfer price from a discrete price method, or used to access a ‘pricing ladder’ where the best price is returned from a hierarchy of possible options.

Transfer Overview