Hi AW Crew,
I am a business owner in the UK of a company with a t/o of around £4m, and have a pretty good handle on the UK side of finance. However, we are about to set up a US subsidiary to enable us to trade with a major US retailer, but I am having trouble with transfer pricing of our products. I have spoken to several US accounting companies, and been hit with the scare tactics and over quoting as is customary, so I was wondering whether you folks had any good resources that you could point me to? The business set up is really quite simple as below:
1) UK Ltd manufactures finished goods (same as the products that are sold in the UK)
2) US Corp purchases finished goods and arranges (and pays for) transport and import costs
3) US Corp sells goods onto US retailer
There are no employees, no offices, just stock being held in a warehouse on the West Coast waiting to be sent to the retailer. All management is done by UK Ltd, the US Corp is effectively a virtual company to enable us to sell to the US retailers as they don't work with foreign entities. US Corp costs are minimal- just the inbound and outbound transportation, a couple of marketing costs and some insurance and compliance costs. I am just struggling to get to the point of deciding how much the UK needs to charge the US, and how low I can allow the US margin to go as it is obviously more tax efficient to have as much of the profit in the UK as possible due to differing Corp Tax rates.
Any advice, resources or suggestions more than welcome!