Transfer Pricing and Value Creation

1. S. 199Introduction

Procurement services within multinational enterprises have evolved significantly over the past years. As globalization and digitization are gaining speed and scope, procurement is becoming more of a significant asset for many companies. No matter what industry the multinational enterprise (MNE) is focusing on, procurement activities, being accountable for supply for the operations of the company, have direct impact on the key company financial indicators, such as balance sheet and cash flow. Procurement functions can truly be considered as one of the key functions in an MNE.

This section describes the latest trends in procurement and its impact on the key values delivered by it. The increasing role of IT technologies have changed the way procurement services are evaluated. IT software usually has specific settings and supports particular processes of the MNE. The benchmarking, therefore, becomes more and more complicated which brings further challenges in respect to a correct arm’s length price determination.

This section will also explain the background of application of transfer pricing methods on procurement functions as well as challenges with the interpretation of...