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Tipi Tips #12: What is the resale minus method?
Today’s topic is the resale minus method.
One of the transfer pricing methods is the resale minus method. We will use a seller of apples as a common example for each method.
The resale minus method can be used when you are selling apples to third-parties, but buying your apples from a related party. We want to see whether the input price is the same as what a third-party would pay. We simply take the sales price of the apples as a starting point, and subtract a profit margin per apple to get to the input price. If a 5% profit margin per apple is appropriate for an independent seller of similar apples, then we can simply subtract this 5% from our sales price, and have an arm’s length price for our input.
And that is how the resale minus method works.
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Vincent Maessen
Founder Tipi Consultancy