The role of the corporate treasurer has evolved over the past 15 years from dealing with cash management to setting and applying group funding policies. Therefore the Corporate Treasurer is in the perfect position to set the group transfer pricing policy for Treasury operations and support the documentation of the group policies.
There are two categories of intra-group transactions which potentially require the Corporate Treasurer to apply transfer pricing principles.
Intra-group transactions where Corporate Treasurers have limited influence on the pricing, for example:
• sales of semi-finished and finished goods;
• use of intellectual assets such as patents, trademarks, and know-how;
• provision of centralized and regionalized services.
These transactions have a direct effect on group entities earnings before interest and tax and therefore impact on the entities cash flows and balance sheet cash position.
Intra-group transactions where Corporate Treasurers have a direct influence on the pricing:
• cash management;
• guarantee fees;
• interest rates;
• forex management.
This technical guide looks to explain some of the General Principles of Transfer Pricing and links those principles to the treasury operations. In addition we have added appendix 1 which looks at more general transfer pricing issues for goods and services.