Transfer Pricing and break-even point: case study Stiga.

In an increasingly globalised world, economic transactions between companies operating in different countries and belonging to the same multinational group have become a common practice, making compliance with Transfer Pricing regulations a crucial aspect of corporate management. Multinational enterprises must adhere to both international and national Transfer Pricing regulations, which govern the determination of transfer prices based on the arm’s length principle and require comprehensive documentation analysing the functions and activities performed by each entity within the group. Transfer Pricing regulations have established various methodologies to determine transfer prices, aiming to prevent profit shifting and tax avoidance. Companies must select the most appropriate methodology based on their operational structure and specific business activities. In addition to analysing these aspects, this study focuses on the concept of the break-even point in the context of Transfer Pricing. The analysis outlines the key steps to identify the break-even threshold within a multinational group, ensuring adequate remuneration for all subsidiaries in compliance with the arm’s length principle while also assessing strategies to maintain the parent company's profitability. To provide a practical perspective, the thesis includes a case study on Stiga, a multinational enterprise in the Outdoor Power Equipment sector, utilising company-specific data and documentation. Through the analysis of data provided by the company, the study focuses on determining the break-even point and aims to demonstrate that this calculation can serve as a strategic tool for balancing tax compliance and profitability. Ultimately, the findings highlight how multinational groups can leverage break-even analysis to manage their financial and operational structures more effectively.