SUP is a large supermarket chain.

Question

SUP is a large supermarket chain. It produces many 'own brand' goods in Country S where the parent company is located. These goods are sold in SUP's supermarkets in Country S as well as being sold at a 'transfer price' to SUP companies located in foreign countries for sale in the SUP supermarkets located in that country.
Which of the following factors is the most important for SUP from a lax planning and compliance viewpoint when setting prices for the 'own brand' goods sold to other group companies'?

Accepted Answer

A. Complying with tax thin capitalisation regulations that apply in both tax jurisdictions.

Answer

B. The price should be higher than for other group companies if the group company that is purchasing the goods has a higher marginal tax rate than the SUP parent company.

Answer

C. The price should be much lower than average if the group company that is purchasing the goods has a higher marginal tax rate than the SUP parent company.

Answer

D. The price should be the same as the price that would be charged by SUP to other, independent, supermarkets that are located in the same foreign country as the group company that requires the goods.

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