§ 1.482-1(d)(3)(ii)(A) 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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Determining the degree of comparability between the controlled and uncontrolled transactions requires a comparison of the significant contractual terms that could affect the results of the two transactions. These terms include –

(1) The form of consideration charged or paid;

(2) Sales or purchase volume;

(3) The scope and terms of warranties provided;

(4) Rights to updates, revisions or modifications;

(5) The duration of relevant license, contract or other agreements, and termination or renegotiation rights;

(6) Collateral transactions or ongoing business relationships between the buyer and the seller, including arrangements for the provision of ancillary or subsidiary services; and

(7) Extension of credit and payment terms. Thus, for example, if the time for payment of the amount charged in a controlled transaction differs from the time for payment of the amount charged in an uncontrolled transaction, an adjustment to reflect the difference in payment terms should be made if such difference would have a material effect on price. Such comparability adjustment is required even if no interest would be allocated or imputed under § 1.482-2(a) or other applicable provisions of the Internal Revenue Code or regulations.






Related Guidelines

  1. 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...
  2. 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...
  3. 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...
  4. TPG2022 Chapter I paragraph 1.43However, the written contracts alone are unlikely to provide all the information necessary to perform a transfer pricing analysis, or to provide information regarding the relevant contractual terms in sufficient detail. Further information will be required by taking into consideration evidence of the...
  5. TPG2022 Chapter I paragraph 1.42A transaction is the consequence or expression of the commercial or financial relations between the parties. The controlled transactions may have been formalised in written contracts which may reflect the intention of the parties at the time the contract was concluded in relation...
  6. 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...


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. Czech Republic vs. AZETKO s.r.o., September 2019, Supreme Court, No. 5 Afs 341/2017 – 47The tax authorities of the Czech Republic issued an assessment of additional income taxes and penalties for FY 2010 and 2011, because AZETKO s.r.o. according to the tax authorities did not receive an arm’s length remuneration for administration and operation of a website...
  4. 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...
  5. 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%....