Workshop by Gerhard Foth and Beat Gubelmann on the occasion of the ISIS) seminar on February 05, 2025 with the title "Services"
Note: This language version is an automatically generated translation. The text may therefore contain linguistic and terminological errors.
view in original language (German)The S Group develops and sells industrial robots. The parent company, M, holds all relevant patents and provides subsidiaries A, B, and C with technical documentation, training materials, and engineering drawings. In addition, a team of engineers at M supports the subsidiaries in the technical implementation and customization of the robots to meet customer needs. To date, these services have been billed as "Technical Services" at cost plus 5%.
The P Group manufactures highly specialized measuring instruments. Its subsidiary D develops the software for these devices. In addition to the actual software development, D also assists the other group companies with IT support issues and operates the company website. All services are billed at cost plus 5%.
The R Group is introducing a new corporate strategy. The parent company M has commissioned a renowned strategy consulting firm for this purpose. The costs are to be allocated to all subsidiaries. The new strategy envisages that the group will focus on the premium segment in the future. However, the subsidiary E serves exclusively price-sensitive markets in emerging economies.
Subsidiary C of the well-known T Group needs a bank loan. In reality, C has a relatively weak balance sheet and can provide virtually no collateral. However, the bank trusts that the well-known T Group would step in to help its subsidiary if necessary; therefore, even without a formal guarantee, it waives the collateral that would normally be required and grants C the loan at a favorable interest rate of 4% instead of the 6% that would otherwise be due.
The parent company M of the T Group learns from an employee of C that there were some irregularities at C last year and that various financial control processes are apparently not being followed as intended by M. For this reason, M decides to establish an internal audit department to ensure that everything runs as M intends at subsidiaries A, B, and C in the future.
The T Group provides various services to its subsidiaries centrally through its finance department. The T Group would like to charge the subsidiaries as much as possible for these services. Recently, the parent company M engaged an external service provider for various financial consulting services—an average hourly rate of CHF 200 was agreed upon for these services. According to M, the services are essentially comparable to those provided internally to the subsidiaries.
The T Group sells machinery to customers through its subsidiaries. In this context, Subsidiary C also provides services to customers. Service services related to special digital sensors in the machines—which then provide customers with various information via dashboards—are included in C’s general service contracts with its customers but are provided only by the parent company M, as only M employs the appropriately qualified personnel. For this reason, internal billing of these service services from M to C is required.
The T Group maintains a central department at M that supports the subsidiaries in customer acquisition. On the one hand, general support services are provided, such as sales training and the general preparation of sales materials. On the other hand, the subsidiaries receive targeted support for larger projects, e.g., through assistance with project costing, dry runs for specific sales meetings, etc.
The T Group, through its parent company M, also provides a wide range of administrative services to its subsidiaries, e.g., in finance, human resources, IT, and legal affairs. Employees generally do not keep detailed time records.
An intra-group contract is to be drafted for the general services provided by the parent company M within the T Group. An initial draft is relatively brief, and the T Group’s legal department, which has the contract on its desk for review, is not very enthusiastic, as the contract looks significantly different from typical service contracts with the T Group’s external customers.
The T Group wishes to prepare transfer pricing documentation for its subsidiary C, which is based in Germany. This documentation should also cover the intra-group services provided by the parent company M to C. The Group also wants to ensure that the subsidiaries are as well-prepared as possible for the next tax audit.
