Transfer Pricing Margin Calculator
Model intercompany transfer pricing between a parent and a foreign subsidiary or affiliate. Set a cost-plus arm's-length benchmark, allocate margin across jurisdictions, and flag where the structure may attract tax scrutiny.
Transfer price sensitivity (-15% to +15%)
| Transfer price | Parent after-tax | Affiliate after-tax | Combined margin |
|---|---|---|---|
| $13.60 | $1.26 | $9.97 | 40.1% |
| $14.72 | $2.15 | $9.00 | 39.8% |
| $16.00 | $3.16 | $7.88 | 39.4% |
| $17.28 | $4.17 | $6.75 | 39.0% |
| $18.40 | $5.06 | $5.78 | 38.7% |
How the split works
- Parent: transfer price minus manufacturing cost and overhead, taxed at the parent rate.
- Affiliate: its sell price minus the transfer price and its operating cost, taxed at the affiliate rate.
- Arm's-length benchmark: parent cost (manufacturing + overhead) times (1 + cost-plus markup).
- Sensitivity: moving the transfer price shifts profit between the two tax rates. A higher price moves profit to the parent.
Illustrative model only. A transfer price set mainly to move profit to the lower tax rate is exactly what tax authorities look for. Transfer pricing must follow the arm's-length rules in each jurisdiction; confirm your structure with a tax adviser.
Tax is applied to losses at the same rate (a loss produces a tax credit), and the scrutiny check uses a simple $2 band around the arm's-length price, as in the original tool.
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