Transfer pricing Local File
Short name · Financial year · Prepared by
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1Introduction
This report documents the controlled transactions of ("") with its associated enterprises in the financial year ("FY "). It assesses whether these transactions comply with the arm's length principle under and the OECD Transfer Pricing Guidelines (the "OECD Guidelines").
The report describes and the group it belongs to, its controlled transactions, the functions performed, assets used and risks assumed by the parties, the transfer pricing methods applied, and the conclusion on the arm's length nature of each transaction.
2Group overview
is part of , headquartered in .
More information on the group's structure, business and value drivers is provided in the Master File.
3Local entity
3.1Company overview
is registered in . distributes the group's to in . Its activities comprise sales, customer service and order handling. In FY it employed approximately people.
3.2Ownership and management
is directly owned by . The ultimate parent company is .
is managed by , who reports to based in . The local organisation chart is included as an appendix.
3.3Business and strategy
The business strategy of is set by the group and implemented locally. In FY the main priorities were .
3.4Restructurings and intangible transfers
was not involved in or affected by a business restructuring, and no intangibles were transferred to or from , in FY or the preceding year.
3.5Market and competitors
The main competitors of in are .
3.6Functional profile
acts as a limited-risk distributor. It buys finished products from and resells them in , performing local sales, customer service and order handling. sets the commercial strategy, product range and pricing policy, owns the trade names and bears the main market, inventory and credit risks. does not own valuable intangibles and is expected to earn a limited but stable return.
3.7Functions, assets and risks
The table below summarises the functions performed, assets used and risks assumed by and .
| Functions | ||
|---|---|---|
| Assets | ||
|---|---|---|
| Risks | ||
|---|---|---|
Full = performs the function, uses the asset or bears the risk to a significant extent. Limited = to a limited extent. — = not at all.
controls the key commercial risks: it decides on the product range, prices and stock levels and has the financial capacity to absorb losses. The risks of are limited to those of its own sales operations.
4Controlled transactions
engaged in the following controlled transactions in FY (amounts in ):
| Transaction | Counterparty | Country | Relationship | Amount |
|---|---|---|---|---|
4.1
4.1.1Description
purchases from , , for resale in . In FY purchases amounted to .
The transaction is governed by the . Prices are set and invoiced .
4.1.2Functional analysis
In this transaction performs . . therefore performs the less complex functions and bears limited risks. Compared with the prior year, there were in the functions, assets and risks of the parties.
4.1.3Transfer pricing method
The Transactional Net Margin Method (TNMM) is selected as the most appropriate method, with as tested party and the as profit level indicator. performs the less complex functions, and reliable data on comparable independent companies is available.
The CUP method was rejected because no sufficiently comparable transactions were found. The resale price and cost plus methods were rejected because reliable gross-margin data is not available for comparables. A profit split is not appropriate, as neither party makes unique and valuable contributions.
4.1.4Comparables
A search for comparable independent companies was performed in in , covering . After screening for independence, activity and size, and a manual review, comparable companies were accepted.
| Indicator | Lower quartile | Median | Upper quartile |
|---|---|---|---|
The interquartile range is used to narrow the results to the most reliable comparables (para 3.57). The full benchmark study is included as an appendix.
4.1.5Assumptions and adjustments
The analysis measures results at level, excluding interest, tax and extraordinary items, and uses the tested party's data for FY . No comparability adjustments were made to the results of the tested party or the comparables.
4.1.6Financial data used
The financial data of used in this analysis are taken from its accounts for FY , summarised under Financial information.
4.1.7Arm's length conclusion
In FY , the of was , within the interquartile range of to . The transaction is therefore considered to be at arm's length.
4.1.8APAs and tax rulings
There are no advance pricing agreements or tax rulings relating to this transaction.
5Financial information
The annual accounts of for FY are included as an appendix. A summary is shown below ().
| FY | |
|---|---|
| Revenue | |
| Gross profit | |
| Operating profit (EBIT) | |
| Operating margin |