Case Study 3: Transfer Pricing for Distribution and Marketing Intangibles (US)

A European healthcare and pharmaceutical company had been operating a US subsidiary with very limited success for several years. The European parent was now embarking upon a significant marketing campaign in the United States and WTP Advisors was engaged by European counsel to review the client’s proposal to significantly alter their distribution and intercompany pricing arrangements. Our transfer pricing analysis focused on the product transfer pricing and related marketing intangibles issues associated with the US operations. In addition to identifying issues associated with the ownership of marketing intangibles under the new marketing plan, our transfer pricing review disclosed import duty and multistate tax issues embedded in the company’s distribution plans. We recommended changes to the transfer pricing plan in order to mitigate potential income tax exposure and to meet parent company income and cash flow preferences.