Transfer pricing issue
Two companies have an external consortium with one client.
We have to place a Purchase order with a Spanish company to provide training on site for the equipment they have purchased. The original budget was in the offshore company's scope but they say they made a mistake and cannot place the PO because it relates to training that has to be conducted onsite. If they place the PO they say they risk a PE in my country.
The training is for equipment they supplied.
The external consortium is split in that off shore company provide equipment only to the construction site and the onshore company do the construction and erection works.
Although the training is to be done on site I think that the PO should be placed by the offshore company because the training is in relation to the equipment they have supplied.
If the offshore company insist that the PO should be placed by on shore company it means Onshore comapny margin reduces and off shore company margin increases.
Is there not a transfer pricing issue here with shifting margin from one country to the other even though that is not the direct intention?
Thanks
Robert Jones
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