Management fee allocation modeller
Split a cost pool by headcount, revenue and assets and compare the keys.
Open itA margin two points short of the range does not sound like much until it is multiplied by revenue and by the number of open years. This does that multiplication, adds penalty and interest, and names the secondary adjustment that follows.
The exposure
$
Whichever base your profit level indicator is measured on. Revenue for a margin on sales, total cost for a cost-plus mark-up.
%
The tested entity result for the year, on the same base.
%
The nearer edge of the range, or the median, depending on the rule that applies.
%
The rate in the jurisdiction making the adjustment.
%
Regimes vary widely and many reduce it where documentation exists. Enter the figure for yours.
%
The statutory or prescribed rate where the adjustment is made.
years
One adjustment usually implies the same adjustment in every open year with the same facts.
Total exposure
—
Margin gap, in points —
Already at or above the target —
Profit as returned—
Profit at the target margin—
Primary adjustment—
Tax on the adjustment—
Penalty—
Interest across the open years—
Total—
Average per open year—
Cash sitting in the wrong entity—
Exposure as a share of the base—
Headroom above the target, in points—
A primary adjustment is only the first of three consequences
The primary adjustment increases taxable profit in the jurisdiction making it, and tax, penalty and interest follow. That is the number most people model. It is not the whole exposure.
The second consequence is economic double taxation: the same profit has now been taxed in two countries, and it stays that way unless the other country makes a corresponding adjustment, usually only available through the treaty's mutual agreement procedure. The third is the secondary adjustment — the cash equivalent of the primary adjustment is still sitting in the other entity, and several regimes deem it to be a loan bearing interest, or a distribution, until it is repatriated.
Why the year count does most of the damage
Transfer pricing is a policy, and a policy that produced a two-point shortfall this year almost certainly produced one last year too. An audit that finds a gap in the year under review will normally look at the other open years, and the exposure multiplies straight away. Set the year count to one to see the single-year number, then to three or four to see what the file is actually worth.
This is also where documentation earns its cost. Many regimes reduce or remove the penalty layer where contemporaneous documentation exists and the analysis was reasonable, which is a discount on the largest add-on rather than on the tax itself.
Worked example
A captive service entity with 20 million of revenue returned a 3.0% margin. The nearer edge of the range is 5.2%, and three years are open on the same facts.
- The gap is 2.2 points, which on 20 million is a primary adjustment of 440,000 for the year.
- Tax at 25% is 110,000. A penalty at half the tax adds 55,000, and interest across three years adds more again.
- The 440,000 of cash is still in the service recipient, which is what the secondary adjustment reaches.
Drop the penalty to zero — the position where documentation holds — and watch how much of the total goes with it.
What this calculator assumes
- One year of margin gap is multiplied for tax, and interest is simple interest at the rate you enter for the number of years you enter. Penalty regimes differ far too much to model, so it is a percentage of the tax.
- No corresponding adjustment in the other country is assumed. Where one is available, it reduces the economic cost but not the penalty or the interest.
- The secondary adjustment figure is the primary adjustment. Whether it is treated as a loan, a distribution or nothing at all depends on the jurisdiction.
- Currency is whatever you type. Nothing here converts.
An estimate, not advice. This is an estimate built from what you typed, not advice on your file. Nothing here reads your documents, checks your treaty article or looks at the year you are actually in. Where the number matters, we agree a fixed fee in writing before any work starts.
Where these figures come from
- current guidelines OECD Transfer Pricing Guidelines — adjustments and dispute resolution
- current guidance Canada — transfer pricing penalties and adjustments, CRA
- current guidance United States — transfer pricing examinations, IRS
Any figure prefilled in the panel above is stated with the year it belongs to and can be changed. Rates and thresholds move; a calculator that asks you for the current one stays right, and one that hides a guess does not.
Cross-border situations we are engaged for
Case study 1
Adjustment exposure estimated ahead of a transfer-pricing review
A company facing an upcoming transfer-pricing review of its intercompany service charges wanted to understand its potential exposure before the review began. We estimated the range of adjustment the examiner might propose based on the strength of the existing documentation, and the company prepared its response strategy around that estimate.
Case study 2
Exposure reassessed after a benchmarking study was strengthened mid-review
A company's initial transfer-pricing exposure estimate was based on a weak, outdated benchmarking study, and the exposure changed materially once a stronger, updated study was prepared during the review. We recalculated the exposure against the improved documentation, and the revised, lower estimate reflected the company's now better-supported position.
Case study 3
Adjustment exposure modelled across two possible pricing methods before choosing one
A company considering switching its transfer-pricing method for a service arrangement wanted to understand how each method would affect its adjustment exposure if reviewed. We modelled the exposure under both methods, and the company selected the method that produced both a defensible position and lower exposure.
Case study 4
Documentation Built to the US Standard
The US requirements differ from the OECD-aligned ones in what has to exist at the time of filing, and a file prepared for one regime can leave the other unprotected. The engagement builds to whichever governs.
Read how this one runs
Case study 5
Whether Documentation Was Required At All
The obligation turns on the transactions that actually happened rather than on the size of the group, and the penalty for contemporaneous documentation is charged by reference to the adjustment. The review establishes which side of the line the company sits.
Read how this one runs
Case study 6
A Shareholder Loan Across a Border at No Interest
An interest-free loan between related companies is priced as if it carried interest, and in some cases a deemed benefit follows as well. The file sets a rate against the borrower's own credit profile and documents the terms that support it.
Read how this one runs
Case study 7
A US LLC Owned by a Canadian, Taxed Twice by Design
The two countries classify an LLC differently, so the credit relief that ought to apply frequently does not. The engagement looks at whether the structure can be changed, and where it cannot, at how to make the credit work.
Read how this one runs
Case study 8
US Estate Tax on Assets a Canadian Did Not Know Were Exposed
US shares and US real estate sit inside the US estate tax net regardless of where the owner lives. The treaty provides relief that is proportionate rather than automatic, and the calculation depends on the worldwide estate.
Read how this one runsAll case studies — every published engagement in one place.
Core International & Cross-Border Tax Services
International Tax Planning & Advisory
Strategy and compliance for income, assets and families spread across borders.
One coordinating team: filings on every side of the border are sequenced so treaty relief and foreign tax credits are claimed once — and in the right country.
U.S. & Cross-Border Tax Returns
Dual filers: U.S. citizens in Canada and Canadians with U.S. income run two parallel systems — we prepare both, in the right order, every year.
Expat & Emigration Tax
The move year is its own project: the elections and valuations filed that year decide the next decade of both countries’ returns.
Non-Resident Canadian Tax
Default withholding is 25% of gross: elective returns routinely turn over-withheld rent and pensions into refunds.
Transfer Pricing & BEPS
Documentation prepared with the return is the cheapest insurance in international tax; reconstructing it during an audit is the most expensive.
Tax Treaties & Withholding
Relief is only as good as the paperwork claiming it — we build treaty positions that survive review on both sides.
Cross-Border Estates & Trusts
Wills drafted for one country routinely misfire in the other — deemed disposition here, estate tax there, credits in between.
Global Investments & Reporting
Information returns carry the sharpest penalties — $25 a day whether or not any tax is owing. We keep them clean and on time.
Cross-Border Corporate Tax
Expansion raises the same four questions every time — entity, PE, repatriation, payroll. We answer them before the tax authorities do.
India Tax for NRIs & Returning Residents
The deduction is taken on the sale price, not the gain — which is why an NRI property sale strands cash unless the certificate is applied for before closing.
Canadian Tax with a Foreign Element
Residency is decided on facts, not on a form — and the year you arrive or leave is the one where the largest amounts turn on the smallest details.
UAE Tax for Expats & Their Home Country
A zero-tax country is only half the answer — the question that decides the bill is whether the country you came from still treats you as resident.
Industries & Client Types We Serve Worldwide
Global E-commerce & Marketplaces
Technology & SaaS
Professional Services Firms
Cross-Border Real Estate
Importers, Exporters & Manufacturers
Athletes, Artists & Entertainers
Remote Workers & Digital Nomads
Investment Funds & Holding Companies
Global E-commerce & Marketplaces
- Foreign VAT / GST / sales tax registrations
- Marketplace withholding reviews
- Inventory nexus & PE analysis
- Multi-currency books reconciled
Who We Serve:
Technology & SaaS
Software revenue crosses borders by default — sourcing rules, withholding on licence-like payments and IP location decide the effective rate.
Software revenue is rarely taxed where the team sits. Licence, subscription and service income are characterised differently by each side, and the answer decides withholding at source, treaty relief and whether a foreign customer creates a taxable presence at all — questions that are cheap to settle before the contract and expensive afterwards.
- Cross-border revenue sourcing & withholding
- IP structuring with real substance
- Equity for cross-border teams
- U.S. expansion: entity & PE setup
Who We Serve:
Professional Services Firms
- Reg 105 / 102 waivers
- Permanent establishment risk
- Partner mobility planning
- Cross-border withholding recovery
Who We Serve:
Cross-Border Real Estate
- Section 216 rental returns
- FIRPTA withholding recovery
- Section 116 clearance
- Treaty credit optimization
Who We Serve:
Importers, Exporters & Manufacturers
- Transfer pricing documentation (s.247)
- Customs value vs transfer price
- Foreign affiliate reporting (T1134)
- Country-by-country reporting
Who We Serve:
Athletes, Artists & Entertainers
- Reg 105 & U.S. CWA agreements
- Multi-state & country calendars
- Touring income allocation
- Royalty & image-rights withholding
Who We Serve:
Remote Workers & Digital Nomads
- Residency analysis before moving
- Employer payroll exposure
- Totalization & social security
- Foreign tax credits
Who We Serve:
Investment Funds & Holding Companies
- Treaty access & PPT reviews
- FAPI & surplus computations
- Withholding-efficient routing
- Governance & substance
Who We Serve:
