When we work with companies scaling overseas, one of the “accounting things” that inevitably pops up is transfer pricing.
Yes, it sounds dry. Yes, the Big Four can charge $50k to $100k to wrap it in red tape and binders. And yes, it’s still something you need to wrap your head around — ideally before a tax office somewhere does it for you.
So, what actually is transfer pricing?
In plain English: as you expand globally, each of your international entities needs to account for revenue, costs and profit as if they were all doing business with each other at arm’s length — like total strangers, despite living under the same roof. Each tax jurisdiction wants its fair slice of the revenue pie, and your job (well, your CFO’s job) is to keep things reasonable.
Why does it matter? Because no government wants to be the one left with crumbs while multinationals play profit hide-and-seek in low-tax jurisdictions.
For SaaS companies born global, this becomes something to consider fairly early on. You can’t just set up shop overseas, beam services through the cloud and assume the tax gods will sort it out. Spoiler: they won’t.
Why Transfer Pricing Matters for B2B SaaS Companies
SaaS companies are a special breed. You’re often dealing with:
Software licensing and IP rights
You likely started building your product in one country — say, Australia. That’s where the IP technically sits. Then you launch in, say, the US or UK, setting up a local sales entity. Suddenly, you’ve got development costs in one location and sales revenue in another. Even if you’re not playing the tax game, the ATO might think you are.
Intercompany services
Marketing, product development, tech support — these services often span borders. You’ll need to allocate costs and revenues between your entities in a way that makes sense and looks good on paper. Not sure how to think about your structure? Have a read of this piece on setting up your startup’s financial foundations.
Cloud infrastructure costs
Most SaaS companies run on centralised cloud services (shout out to AWS and the daily existential bill shock). You’ll need a way to fairly allocate that spend between countries — especially when one region is guzzling more server juice than the others.
Rapid growth and investment
If you’re gunning for Series B, IPO or acquisition, your investors will be scanning for good governance, including your transfer pricing strategy. Don’t let “Tax Time Bomb” be the headline in your next due diligence report.
You Can Start Simple
Good news: you don’t need a 100-page document written in legalese (yet).
Here’s what you can do now:
- Track intercompany charges in your accounting software — our bookkeeping and accounting services can help
- Use simple allocation methods like headcount or usage % for costs like salaries or cloud spend
- Draft basic intercompany agreements — no law degree required
- Keep asking: Would this pricing make sense between two unrelated companies? If yes, you’re on track
This kind of groundwork pays off later, when the ATO or HMRC comes knocking with questions (and spreadsheets).
“Transfer pricing might seem like something only multinationals deal with — but if you’re building a SaaS business with global ambitions, it’s going to matter sooner than you think. Get ahead of it now and save yourself a future headache.”
— Remco Marcelis, Managing Partner, Standard Ledger
What’s Involved Down the Track?
Once you’re bigger and bolder (and potentially more profitable), you’ll likely need:
- Functional analysis of what each entity actually does
- Benchmarking to prove you’re not making stuff up
- Formal intercompany agreements
- A consistent transfer pricing policy across the group
By then, you’ll thank past-you for starting early.
Final Thoughts
Transfer pricing isn’t just a problem for the big end of town. For early-stage SaaS companies, it’s one of those accounting concepts (like revenue recognition) that becomes increasingly important as you grow.
So don’t wait until an investor or tax office asks for it. Start small. Build good habits. Scale your approach as you go.
Ready to Make It Easy?
We work with fast-growing SaaS and tech companies every day. If you’d like to chat through your transfer pricing set-up or get introduced to partners who can help without the Big Four price tag, get in touch with us. Your future self (and your CFO) will thank you.
