Paul Sutton and Paul O’Regan discuss the contractual allocation of risk in transfer pricing. The discussion includes an explanation of why functional analysis alone is not sufficient to delineate transactions for transfer pricing purposes; examples of specific contractual clauses that can deal with risk, and how these relate to each other; and three other key factors which must be taken into account.

Paul Sutton gives a detailed overview of contractual allocation of risk in transfer pricing. The discussion looks at:

·      The definition of risk, for transfer pricing purposes

·      What the legal documentation is trying to achieve

·      The role of contracts in allocating risk

·      Examples of contractual clauses that deal with risk

·      The other factors that must be considered

·      The potentially serious consequences of getting it wrong

·      Common mismatches between TP documentation and agreements

·      Key takeaways for transfer pricing professionals.

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