Case Study: Optimizing Tax Efficiency and Restaurant Operations Using Transfer Pricing
August 31, 2022
About the Client:
Aprio partnered with a successful restaurant group based in New York City. With its collection of fine dining restaurants in the heart of Manhattan, the group aims to provide patrons with unique dining experiences by celebrating tradition, offering authentic cuisine and infusing the atmosphere with lively local culture.
The client’s restaurants were already earning operating margins well above the industry average when Aprio started the engagement. The client’s growth was driven by valuable intangible property that it developed outside of the United States, plus a unique offshore service center that helped optimize its operations in the US. Having these assets enabled the client to offload duties from its US employees and provide service to patrons at reduced labor costs.
Amid these notable successes, Aprio saw a few challenges the client needed to resolve. First, the client had to recognize its foreign services and assets appropriately from a tax perspective. Second, the client had to use transfer pricing to properly compensate its foreign entities and thus optimize its overall tax structure.
Aprio’s International Tax Team developed a deep understanding of the client’s business issues and desired tax and financial outcomes. What’s more, the team also collaborated with the client’s legal counsel to make sure it complied with mandatory foreign tax and legal requirements. Finally, the team brought in transfer pricing specialists to collaborate with the client’s external legal advisors and implement the proper transfer pricing structure with appropriate documentation.
Through Aprio’s transfer pricing analysis, the client was able to save approximately $1 million in taxes annually. Aprio also prepared transfer pricing documentation that allowed the client to comply with US transfer pricing regulations, providing penalty protection in the event of an audit. Thanks to Aprio’s work, the client was able to gain a competitive advantage in NYC’s burgeoning restaurant scene, while boosting the bottom line with tax dollars saved.
This success story illustrates how effective tax planning and transfer pricing can help businesses better manage cash flow, protect against liabilities and save more money in taxes. Plus, a documented transfer pricing policy provides companies with valuable substantiation in case of an audit.
Aprio’s International Tax Team can help companies minimize risk and tax dollars paid by providing transfer pricing benchmarking, studies and policy development, helping ensure that intercompany transactions are structured correctly. Our team can also provide clients with US tax compliance support when doing business across borders.
If you are interested in partnering with Aprio to navigate transfer pricing or US tax compliance, contact us today.
About the Author
Carl is a Transfer Pricing Senior Manager with Aprio’s International Tax team. He advises multinational and domestic businesses on intercompany transactions of tangible goods, intangible property, services, and loans. Passionate about helping businesses grow, Carl has helped many clients, including a recent client save $1 million in US tax annually through the use of transfer pricing.
Robert is an international tax partner with more than 27 years of experience providing international tax solutions to publicly and privately-held corporations on an array of international tax matters, such as foreign tax credit management and utilization, structuring foreign and domestic operations, international mergers and acquisitions, and export tax incentives. He also has many years of experience serving foreign-owned U.S. businesses.