§ 1.482-1(d)(1) In general.

Category: (d) Comparability, Transfer Pricing Guidelines, US IRC Section 482 on Transfer Pricing, § 1.482-1 Allocation of income and deductions among taxpayers | Tag: , , ,
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Whether a controlled transaction produces an arm’s length result is generally evaluated by comparing the results of that transaction to results realized by uncontrolled taxpayers engaged in comparable transactions under comparable circumstances. For this purpose, the comparability of transactions and circumstances must be evaluated considering all factors that could affect prices or profits in arm’s length dealings (comparability factors). While a specific comparability factor may be of particular importance in applying a method, each method requires analysis of all of the factors that affect comparability under that method. Such factors include the following –

(i) Functions;

(ii) Contractual terms;

(iii) Risks;

(iv) Economic conditions; and

(v) Property or services.






Related Guidelines

  1. TPG2022 Chapter I paragraph 1.50The following example illustrates the concept of determining the actual transaction where a transaction has not been identified by the MNE. In reviewing the commercial or financial relations between Company P and its subsidiary companies, it is observed that those subsidiaries receive services...
  2. TPG2022 Chapter I paragraph 1.49Where no written terms exist, the actual transaction would need to be deduced from the evidence of actual conduct provided by identifying the economically relevant characteristics of the transaction. In some circumstances the actual outcome of commercial or financial relations may not have...
  3. TPG2022 Chapter I paragraph 1.48The following example illustrates the concept of differences between written contractual terms and conduct of the parties, with the result that the actual conduct of the parties delineates the transaction. Company S is a wholly-owned subsidiary of Company P. The parties have entered...
  4. TPG2022 Chapter I paragraph 1.47Where there is doubt as to what transaction was agreed between the associated enterprises, it is necessary to take into account all the relevant evidence from the economically relevant characteristics of the transaction. In doing so one must bear in mind that the...
  5. TPG2022 Chapter I paragraph 1.46In transactions between independent enterprises, the divergence of interests between the parties ensures (i) that contractual terms are concluded that reflect the interests of both of the parties, (ii) that the parties will ordinarily seek to hold each other to the terms of...
  6. TPG2022 Chapter I paragraph 1.45If the characteristics of the transaction that are economically relevant are inconsistent with the written contract between the associated enterprises, the actual transaction should generally be delineated for purposes of the transfer pricing analysis in accordance with the characteristics of the transaction reflected...


Related Case Law

  1. Portugal vs “FURNITURE S.A.” No I, November 2021, CAAD, Case No 14/2021-TFurniture S.A is engaged in the production and sale of furniture and had established a US subsidiary to market and sell furniture overseas. The pricing of the controlled transactions with the US subsidiary had been based on a resale price method, which resulted...
  2. Portugal vs “FURNITURE S.A.” No II, November 2021, CAAD, Case No 604/2021-TFurniture S.A is engaged in the production and sale of furniture and had established a US subsidiary to market and sell furniture overseas. The pricing of the controlled transactions with the US subsidiary had been based on a resale price method, which resulted...
  3. India vs ST Microelectronics Pvt. Ltd., September 2020, Income Tax Tribunal, ITA No.6169/Del./2012ST Microelectronics Pvt. Ltd. is a subsidiary of ST Microelectronics Pte. Ltd. which in turn is a wholly owned subsidiary of ST Microelectronics NV, Netherlands. ST Microelectronics Pvt. Ltd. is into the business of Integrated Circuit Design, CAD Tools and software development for...
  4. Poland vs “Shopping Centre Developer sp.k.”, June 2022, Supreme Administrative Court, Case No II FSK 3050/19A Polish company, “Shopping Centre Lender sp.k.”, had been granted three intra group loans in FY 2013 for a maximum amount of EUR 2 million, EUR 115 million and EUR 43.5 million. The interest rate on the loans had been set at 9%....
  5. Poland vs “Shopping Centre Developer sp.k.”, May 2019, Administrative Court, Case No III SA/Wa 1777/18A Polish company, “Shopping Centre Lender sp.k.”, had been granted three intra group loans in FY 2013 for EUR 2 million, EUR 115 million and EUR 43.5 million. The interest rate on the loans had been set at 9%. The tax authorities found...