Transfer pricing refers to the prices at which intragroup transactions are conducted between entities of the same group in different countries — goods sales, service fees, intellectual property licences, intercompany loans. The arm's length principle requires these prices to be consistent with those an independent company would pay in similar circumstances. In financial due diligence on Franco-Swiss groups, transfer pricing compliance is systematically verified — a tax reassessment on intercompany prices can represent millions in additional liability, directly impacting the acquisition price and SPA warranty scope.

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Example: a Franco-Swiss group charges 3% royalties on French subsidiary revenue to its Swiss holding. French tax authorities challenge this rate as below market (sector benchmark: 4.5–6.0%). A 5% restatement on CHF 30.0 million revenue generates CHF 600,000 of additional annual royalties × 25% French corporate tax = CHF 150,000 additional tax per year. Over a 3–6 year audit period, the exposure is CHF 450,000–900,000 — integrated as a warranty provision in the SPA.

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Hectelion analyses transfer pricing risk in Franco-Swiss group due diligence and advises on documentation requirements to withstand tax authority scrutiny.