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TP _ Resale minus vs. Cost plus Mark-up

 Q - What is the difference between 'resale minus' and 'cost plus mark-up' in the transfer pricing? In the realm of transfer pricing, which governs the prices of goods and services exchanged between related entities of a multinational corporation, the resale minus and cost plus mark-up methods are two traditional approaches to establishing an arm's length price—a price that would have been agreed upon by unrelated parties. The fundamental difference between these two methods lies in their starting point and the direction of the calculation. The Core Distinction The resale minus method, also known as the resale price method, begins with the price at which a product purchased from a related party is resold to an independent third party. From this resale price, a gross margin is subtracted to arrive at an arm's length price for the intercompany transaction. This gross margin represents the amount from which the reseller would cover its selling and other operating e...
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Colombia- Withholding tax

  Based on the tax regulations effective in January 2026 , the "shortfall" is due to Colombian Withholding Taxes that the local affiliate is legally required to deduct before sending payment to the US. No enforced Double Tax Treaty between the US and Colombia, the Colombian entity cannot pay the full invoice amount without deducting these taxes. Here is the breakdown of why the payment is short . 1. The Main Cause: Income Tax Withholding (Retención en la Fuente) Colombia imposes a high withholding tax on payments sent abroad for services, specifically "technical services, technical assistance, and consulting." 1 The Rate: The standard rate is 20% . 2 Note: If the "administrative fee" is classified purely as management fees without a "technical" component, the rate could theoretically be higher (33%), but 20% is the most common rate applied to intercompany service charges. The Mechanism: If you invoice $10,000 , the Colombian entity must dedu...
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VAT_ Intercompany netting between the US and Mexico

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 Intercompany netting between US and Mexican affiliates and how it relates to applying the zero-rate VAT (IVA - Impuesto al Valor Agregado) in Mexico. 1. What is Intercompany Netting? Intercompany netting is essentially a financial process used by multinational companies to manage and settle mutual debts between their various subsidiaries or affiliates. Instead of each entity making separate payments for every single invoice owed to another related entity, they:   Calculate the total amount each entity owes to others within the group. Offset these amounts against each other. Only pay the final net difference. For a US parent and a Mexican affiliate: The Mexican affiliate might owe the US parent for management fees, royalties, or imported goods. The US parent might owe the Mexican affiliate for manufactured goods, services rendered (like IT support, call center operations, maquila services), etc. Through netting, they determine the net amount owed and by whom, resulting...
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