Resale price method

The resale price method sets an intra-group transfer price by taking the price a related distributor resells goods to outside customers and deducting an arm's-length gross margin for that distributor's own function.

ByHoang TruongUpdated July 11, 2026

FrameworkOECD Transfer Pricing Guidelines

See it move

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A related-party distributor resells a product to unrelated retailers for €80 per unit. Independent distributors performing a comparable function earn a gross margin of 25% of the resale price, or €20. Deducting that margin from the €80 resale price leaves €60, the arm's-length transfer price the group's manufacturing entity should be treated as charging the distributor.

Where it fits

SubjectManagerial AccountingAdvancedTopicTransfer PricingAdvanced

The formula

LaTeX

TP = P_R (1 - m)

Variables

$T P$: Transfer price (€)
$P_{R}$: Resale price to an independent customer (€)
$m$: Comparable gross margin (% of resale price)

Works backwards from the price charged to an independent customer to the arm's-length price for the earlier intra-group sale.

Check yourself

PracticeCORE

A related-party distributor resells inventory to outside customers for €150 per unit. Independent distributors performing a comparable function earn a gross margin of 40% of the resale price. Using the resale price method, what is the arm's-length transfer price for the intra-group purchase?

Select an answer to check your understanding.