Case study of transaction net interest rate method

Example 1: A is a toy company located in country A. It has two subsidiaries in country B and country C. Both subsidiaries use the proprietary technology developed by parent company A to produce dolls. Products produced by enterprises in country A and B are sold to parent company A in country A, and products not produced by subsidiaries in country C are sold to wholesalers in third countries. Company A uses ROA to evaluate the performance of each company. Company A is a capital-intensive enterprise. Because it uses the asset profit rate index to evaluate the operation and management of its subsidiaries, it is very appropriate to use the asset profit rate to determine the transfer pricing without using the transaction method data. In this case, the profit rate of assets obtained by the subsidiary of country C is 10% (the asset value is calculated according to the original cost of assets). The two subsidiaries are the only companies that produce this kind of dolls in the world, and they use very unique production technology, so there is no comparable data. Company A uses the following method to calculate the doll price paid to the subsidiary of country B. The original cost of the assets used by the subsidiary of country B is $6,543,800,000. According to the asset profit rate of 654.38+00%, the dolls sold by the subsidiary of country B to the parent company A should earn a net profit of $6.5438+million. The subsidiary of country B sells 500,000 dolls to the parent company A every year, so the net profit of each doll should be 2 dollars. The total cost (sales cost plus general and administrative expenses) incurred by the subsidiary in country B is $65,438+00 per doll. In this way, the price of each doll sold by the subsidiary of country B to the parent company A should be $65,438 +02. This method can actually be transformed into the cost plus profit method, that is, the cost plus 20% profit.

Example 2: A is a health food wholesale enterprise located in country A. It buys products from P, the parent company of country B, and then sells them to independent retailers. Company A has relations with three health food wholesale companies, all of which buy products from European manufacturers and then sell them to independent retailers. Therefore, Company A thinks that its business activities are the same as those of these three companies. But these three companies are all private enterprises, and they can only get sales and net profit indicators. Therefore, Company A decided to choose Sales Profit Rate (ROS) as the comparison index. The profit margins of these three companies are 3%, 3.5% and 4% respectively. Company A decided to use 3.5% as a reference. In the past three years, the general and management expenses of Company A accounted for an average of 3% of the sales, and it is estimated that the sales expenses for the next year will be 6% of the sales. In this way, Company A must obtain a gross profit margin of 12.5% in order to obtain a net profit margin of 3.5%. The retail price of each product of Company A is US$ 8, so it must have a net profit of US$ 65,438+0 per product to ensure a gross sales margin of 65,438+02.5%. In this way, the unit price paid by company A to parent company P of country B should be $7.

Example 3: Company P is an American company. It buys plastics from M Company, a German subsidiary, and then wholesales them in the United States. The production and operation of M company in Germany has been licensed by P company in the United States. In addition, M company is the only enterprise in Germany that produces this kind of plastic. It does not sell this kind of plastic to non-affiliated enterprises, but only to company P in the United States. In other European countries, some companies have the license of American company P to produce this kind of plastic and then sell it to third-party wholesalers. Company P in the United States does not know the prices of products sold by European companies to third parties, but only their sales, gross sales margin and net sales profit margin. Company P originally intended to use the cost additive process to determine the transfer price, but through functional analysis, it was found that the data of these European companies contained a large number of factory-level management costs (German company M also had such costs), some of which were part of operating expenses. But company P doesn't know how much of the cost of selling products is the management cost at the factory level. Therefore, it is impossible for company P to get gross profit, but the transnational net profit rate can be determined. At this time, the transaction net profit rate method can be adopted.