Resale Price Method in Transfer Pricing | Detailed Overview & Practical Examples
In this video, we take a deep dive into the Resale Price Method (RPM)—one of the five primary transfer pricing methods used to ensure compliance with the arm's length principle in intercompany transactions. The RPM is especially useful for determining appropriate gross margins for distributors and resellers in related-party transactions, by comparing margins in third-party transactions.
We'll cover:
How the Resale Price Method works
When to apply this method
The benefits and drawbacks of RPM
Real-world examples of the method in action
Timestamps
0:00 – Intro: Resale Price Method in Transfer Pricing
0:24 – Understanding the Resale Price Method
1:37 – When to Use the Resale Price Method
2:39 – Application Challenges
3:40 – Benefits of the Resale Price Method
4:28 – Drawbacks of the Resale Price Method
5:12 – Practical Example of Resale Price Method Application
5:50 – Conclusion
This method plays a key role in pricing tangible goods transactions between related companies by ensuring profits are distributed fairly across jurisdictions. However, the effectiveness of RPM depends on the availability of reliable comparable data and how well gross margins are aligned with the arm’s length principle.
If you're involved in transfer pricing or intercompany sales, this video will help you better understand how to apply the resale price method effectively!
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