Best transfer pricing methods in The Netherlands

The most applied (and most preferred) transfer pricing methods in the Netherlands are the comparable uncontrolled price method, the resale price method and the cost plus method.

The aforementioned methods are described in detail in published policy statements.

Other methods, so called “transactional profit methods” (i.e. the profit-split method and the transactional net margin method or TNMM) may be used as well but these methods are considered more or less as methods of last resort. It is noted that the profit spit method has gained popularity during the last couple of years due to its relative simplicity, but due to the lack of concrete benchmarks it stays a rather arbitrary method and therefor a less preferred method.

The Dutch policy gives concrete guidelines for determining the best method in a concrete situation. Sometimes one method is considered better than another, but in practice a transfer pricing discussion always bears both the element of price comparison and statistical calculation.

The prices charged by a company may be fully in line with normal market prices, but if conditions of the transaction are such that the company cannot be expect to make a normal profit margin, the price may still have to be adjusted (or alternatively expenses charged by group companies may have to be reduced).