Do you have questions you would like answered by your peers in the proformative community?

Jenny Hu Consultant

Rental charge pricing strategy between HoldCo and OpCo

Asked on March 18, 2016

The Hold Co holds all capital assets (manufacturing equipments, etc) and rents them to Op Co for rental income. Except for such rental activities, it doesn't have any other business activities. What is the best pricing strategy to set the rental charge? My main considerations are: 1. Minimize the corporate income tax for Hold Co. Op Co right now has tax losses carry forward to use. 2. The pricing strategy / policy be consistent over the course of assets useful life (10 to 15 years) Appreciate for some quick help! Jenny

Answers

EMERSON GALFO CFO • March 16, 2016

Market rate! At the most, 10% below market rate to give consideration for the relationship.

Jenny Hu Consultant • March 16, 2016

Appreciated! One more question - where can I find reliable source for market rate? Various type of assets, total cost $4 million - it would be a huge undertaking if I have to check with equipment dealers for all of them....

Want to join the conversation? Submit an answer or ask a question by emailing us at [email protected]

Submit an answer