Tugas Pajak Internasional

7 business model in Transfer Pricing

By:
1. Diah Septyana
2. Christina Nainggolan
3. Eko Wicaksono
4. Gilang Aditya

(1306379290)
(1306452745)
(1306415011)
(1406611695)

Fully-fledged manufacturer:

Owns intangibles such as patents, industrial know-how and designs

Buys raw materials and semi assembled goods on own account and holds stock for both
raw and finished goods

Subject to risks of selling goods

Invests in labour, plant and machinery

Is entitled to the residual profit i.e. total profit minus the compensation for the routine
functions

Contract manufacturer:

Owns plant, machinery and employs labour force

Manufactures goods for the principal

No risks related with holding finished goods or selling them

Contract manufacturer holds title and bears stock risk until goods are bought by the
principal

Most of the times principal will guarantee to buy all the goods manufactured

Is entitled to a routine compensation

Toll manufacturer:

Principal holds title to the goods throughout the manufacturing process

Principal buys raw materials / assembled goods, yet physical flow is directly to
manufacturer

Principal bears all the inventory and selling risks

Is entitled to a routine compensation

Buy/sell distributor

Businesses that sell finished goods, be it wholesale or retail, may do so by buying

products, holding them as stock, and promoting and selling them to customers. A distributor buys
the products from the manufacturer and then sells them to third-party customers. It bears the
risks associated with buying, holding and selling stock, such as:
o The risk of not selling
o Stock obsolescence
o Product returns and warranty (but there may well be some recourse to the manufacturer)
o Bad-debt risk of customers
o Exchange risk of buying the goods

Incurs costs for

o Carrying stock
o Promoting
o Marketing
o Selling the products
o Transportation to customer

After-sales servicing

May own marketing intangibles such as brand names. Derive profits from these
intangibles as well

Commissionaire

Representative of principal

Enters into sales contracts in his own name and issues invoices to customers

Legal title from goods passes from principal to customer (physical flow can deviate)

Receives percentage of sales value or a cost plus mark-up from the principal

Acts in his own name on behalf of and at the risk of the principal

Products remain property of principal until they arrive at the customer

Functions and risks involved with buying and holding stock and credit risk of selling
goods are with the principal

Possible changes in a reorganization

o Physical location of stock
o Marketing intangibles such as brand names, client lists, trade marks etc., may be transferred
to principal
o Marketing budget etc. taken over by principal
o Invoice processing will be moved.

Limited-risk distributor

Buying goods and market them to customers

Contract between distributor and principal who will indemnify certain costs

Main functions and risks are with the principal

Risks relating to inventory and debtors are reimbursed by principal, e.g. obsolescent
stock will be redeemed by principal and bad debts will be compensated

Commission/agent

Canvasses for sales and interacts with customers

Terms and contract are agreed outside his territory without its interference

Does not take title of goods

Receives a routine compensation

Agents staff limited role, do not enter in any contract, only introducing customers