Braxton Consulting

A Spanish clean company (CC) is in the business of manufacturing and selling a line of clean products to industrial users. CC requested initialy that updated transfer pricing documentation for multiple countries be performed. The manufacturing process is long-established and well-known. It sells to industrial customers who rely on CC for technical assistance and advice regarding difficult cleaning problems. CC’s salesmen are on 24-hour call to assist customers within 30 minutes of a request. CC has developed training programmes and a service manual that it provides to its sales force.

CC has decided to establish a wholly-owned subsidiary in Argentina. The subsidiary will purchase products manufactured by CC (in Spain) and will be responsible for sales and services in the Argentinan market. CC intends to train the Argentinian subsidiary’s sales force and to provide a copy of the service manual for each member of its Argentinian sales force.

From an inter-company pricing standpoint, the intangible of value is the ability to provide service to the customer. The transfer of this intangible to the Argentinian subsidiary should be accompanied by an arm’s length payment to the Spanish parent.