Tipi Tips #13: What is the transactional profit split method?

Today’s topic is the transactional profit split method.

The profit split method is arguably the most complex transfer pricing method. This method is used when you have complex supply chains or there are intangible assets such as trademarks and brands involved. For this method, we do not look at the transaction, but at the entire supply chain as a whole.

Imagine you sell a apples of a special quality brand, which sell for a higher price than regular apples. The profit split method looks at the contributions each party within a group makes to that higher value of the apple. Say 70% of the profit can be attributed to the special brand of apples. Then 70% of the profit goes to the party who creates and manages the brand.

That is the profit split method in action.

Transfer pricing made easy

Tipi's mission is to explain the field of transfer pricing to you in a transparent and simple manner. We deliver on this mission with expertise, experience and our unique approach. We expose all transfer pricing concepts (and secrets) in our database. Here you can learn the basics of transfer pricing for your business, and get an idea of the work we do to help you navigate the transfer pricing field.

Our transfer pricing services can be divided into three phases in which we can help:

Advance advice

Practical and clear advice based on our three pillars

Build your tax image

Tax Transparency Report: improve your company's tax image


Clear and simple documentation afterwards

Let us inform you about the possibilities

Transfer pricing is the future of international taxation. Let us discuss how we can future-proof your business.

Vincent Maessen

Founder Tipi Consultancy