The resale price method begins with the price at which a product that has been purchased from an associated enterprise is resold to an independent enterprise. This price (the resale price) is then reduced by an appropriate gross margin on this price (the “resale price margin”) representing the amount out of which the reseller would seek to cover its selling and other operating expenses and, in the light of the functions performed (taking into account assets used and risks assumed), make an appropriate profit. What is left after subtracting the gross margin can be regarded, after adjustment for other costs associated with the purchase of the product (e.g. customs duties), as an arm’s length price for the original transfer of property between the associated enterprises. This method is probably most useful where it is applied to marketing operations.
TPG2022 Chapter II paragraph 2.27
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By OECD
Category: Limited Risk Distributor, OECD Transfer Pricing Guidelines (2022), TPG 2022 Chapter II: Transfer Pricing Methods | Tag: Gross margin, Limited Risk Distributors (LRD), Marketing operations, Resale Price Method (RPM), Traditional transaction methods, Transfer pricing methods
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- TPG2022 Chapter II paragraph 2.42Assume that there are two distributors selling the same product in the same market under the same brand name. Distributor A offers a warranty; Distributor B offers none. Distributor A is not including the warranty as part of a pricing strategy and so sells its product at a higher price...
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- TPG2022 Chapter II paragraph 2.39In a case where there is a chain of distribution of goods through an intermediate company, it may be relevant for tax administrations to look not only at the resale price of goods that have been purchased from the intermediate company but also at the price that such company pays...
Supplemental Guidance
- Chile vs Nissan Chile SpA, March 2026, Tax Court, Case No RUC 20-9-0000334-0Nissan Chile SpA, a wholly-owned subsidiary of Nissan Motor Co. Ltd. (Japan), was incorporated in Chile in August 2014 to take over the direct distribution of Nissan-branded vehicles and spare parts previously handled by an independent distributor, Distribuidora Automotriz Marubeni Limitada. Operati...