The degree of consistency in accounting practices between the controlled transaction and the uncontrolled comparables that materially affect the gross profit margin affects the reliability of the result. Thus, for example, if differences in inventory and other cost accounting practices would materially affect the gross profit margin, the ability to make reliable adjustments for such differences would affect the reliability of the results. Further, the controlled transaction and the uncontrolled comparable should be consistent in the reporting of items (such as discounts, returns and allowances, rebates, transportation costs, insurance, and packaging) between cost of goods sold and operating expenses.
§ 1.482-3(c)(3)(iii)(B) Consistency in accounting.
Category: (c) Resale price method, Transfer Pricing Guidelines, US IRC Section 482 on Transfer Pricing, § 1.482-3 Methods to determine taxable income in connection with a transfer of tangible property | Tag: Accounting consistency, Best Method Rule, Buy-sell distributor, Gross profit margin, Most appropriate method (MAM), Most reliable data, Purchase and resale, Resale price method (RPM)
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Next » Related Guidelines
- TPG2022 Chapter II paragraph 2.32It may be appropriate to give more weight to other attributes of comparability discussed in Chapter I (i.e. functions performed, economic circumstances, etc.) when the profit margin relates primarily to those other attributes and only secondarily to the particular product being transferred. This...
Related Case Law
- Italy vs Iprona SpA, February 2025, Supreme Court, Case No 4853/2025Iprona SpA is an Italian company that sells fruit extract powder. It had sold products to an Austrian subsidiary at a price that was nearly tripled when the goods were quickly resold through related companies before reaching a final buyer in Liechtenstein. The...
- Peru vs “Soft Drink Distributor”, October 2018, Tax Court, Case No 07821-9-2018“Soft Drink Distributor” imported concentrates and syrups for a total amount of S/ 8,117,356.00 from related companies, which were then sold exclusively to Ambev, the company responsible for the production, distribution and marketing of soft drinks in the local market. “Soft Drink Distributor”...
- Japan vs “E Corp”, December 2023, Tokyo District Court, Case No 令和２年（行ウ）第３７２号, 372 of 2020Plaintif, “E Corp” is a Japanese corporation whose business activities are focused on four business fields: resources and energy, public infrastructure, industrial machinery, and aeronautics and space. Through company B, E Corp owned the shares in Company A located in Thailand. Company A...
- Latvia vs SIA „RPM”, May 2013, Administrative District Court, A420496211 (A-00305-13/7)The tax authority (SRS) had disregarded the TP method chosen by the taxpayer and performed its own TP analysis which showed that the income had been below the 1. quartile, and on that basis an assessment of additional taxable income was issued. Judgment...
- Panama vs Puma Energy Bahamas SA, June 2024, Supreme Court, N° 849112020Puma Energy Bahamas SA is engaged in the wholesale of petroleum products, accessories and rolling stock in general in Panama. Following a thorough audit carried out by the Tax Administration in Panama, where discrepancies and inconsistencies had been identified between the transfer pricing...