Went for Cost, Priced at Cost? An Economic Approach to Transfer Pricing of Offshored Business Services

Summary

This Special Report provides insight on the implications for businesses as both home and host governments apply the arm's-length standard to offshored services functions, since regulations for services are not as developed as for goods and raw materials. This Report emphasizes the potential problems that can arise for the offshore teleservices industry and for three-tiered transnational company structures.

Below are some selected highlights from this Special Report

• Offshoring Business Services
• A Case Study: Captive Offshoring of Teleservices
• Transfer Pricing of Teleservices in Practice
• CUSP or CUP
• Gross Services Margin Method or Resale Price Method
• Cost of Services Plus or Cost Plus Method
• Three-Tiered Transnational Company Structures
• Location Savings
• Policy Recommendations
• Excerpts from Proposed IRS Section 482 Rules on Services
• India Guidance for IT-Enabled Business Process Outsourcing Units

Authors: Lorraine Eden, professor of management at Texas A&M University
Published: Feb. 1, 2004