Location Specific Advantages (LSAs)
Tax authorities in emerging markets such as China and South East Asia are paying more attention to LSAs.
LSAs generally refer to location savings on the supply side and market premiums on the demand side.
Location Savings
In the context of transfer pricing (TP), ‘‘location savings’’ generally refer to (net) cost savings realized by an MNE (multinational enterprise) as a result of relocating some of its operations from a ‘‘high cost’’ to a ‘‘low cost’’ location.
Market Premiums
On the other hand, market premiums refer to location specific ability to sell products at a higher price.
In a United Nations Transfer Pricing (“TP”) Manual released in 2012 China’s State Administration of Taxation (“SAT”) indicated that China would promote the LSA concept in future practice.
Current challenges include how to identify, quantify and allocate LSAs. Read More
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