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Rental charge pricing strategy between HoldCo and OpCo

Jenny Hu's Profile

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
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

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

Jenny Hu
Title: Consultant
Company: Accounting & Finance Consulting
(Consultant, Accounting & Finance Consulting) |

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....

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