Rapport Ocde

Manual for Responsibility Centres

Transfer Pricing Associates

Technical information

Your bridge to worldwide transfer pricing services

TPA Technical – Manual for Responsibility Centres 2

Introduction

In accordance with the relevant transfer pricing guidelines, the selection of the most appropriate transfer pricing methods depends on the functional and risk pattern within a multinational group as well as ownership of tangible and intangible assets. TPA uses the classifications resulting from best practices in management accounting (i.e., responsibility centres, such as profit-, revenue-, investment- and cost centres) to determine the most appropriate method to price each transaction and to compensate each group company. This Manual describes the common types of responsibility centres from a practical perspective and establishes the relationship with transfer pricing and the choice of OECD transfer pricing methods. It can be used as a mechanism to get from the findings of a functional analysis to choices of transfer pricing methods that are valid from economic and management control perspectives and thus more acceptable for tax purposes in an OECD context.

The use of the responsibility centres concept to structure an organization

In principle the Board of Management has the authority to make decisions within a multinational enterprise (MNE). Decisions by the highest management level within an enterprise about delegation of this authority or decentralization will be influenced by the following four factors:     Maximum span of control The management style concerning the control and steering of the MNE Transaction costs The strategy and the business model applied by the MNE.

By delegation of its authority the top management will determine how a manager to whom authority is delegated will be compensated and/or how the manager will be steered and controlled. Example: The Management Board of a French MNE gives the sales director of its German...