Taxpayers do not always perform searches for comparables on a country-by-country basis, e.g. in cases where there are insufficient data available at the domestic level and/or in order to reduce compliance costs where several entities of an MNE group have comparable functional analyses. Non-domestic comparables should not be automatically rejected just because they are not domestic. A determination of whether non- domestic comparables are reliable has to be made on a case-by-case basis and by reference to the extent to which they satisfy the five comparability factors. Whether or not one regional search for comparables can be reliably used for several subsidiaries of an MNE group operating in a given region of the world depends on the particular circumstances in which each of those subsidiaries operates. See paragraphs 1.112-1.113 on market differences and multi-country analyses. Difficulties may also arise from differing accounting standards.
TPG2017 Chapter III paragraph 3.35
Category: A. Performing a comparability analysis, OECD Transfer Pricing Guidelines (2017), TPG2017 Chapter III: Comparability Analysis | Tag: Accounting standards, Comparability analysis, Comparable uncontrolled price method (CUP), External comparables, Foreign comparables, Insufficient data, Local comparables, Market differences, Multiple-country comparability analysis
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- TPG2022 Chapter III paragraph 3.35Taxpayers do not always perform searches for comparables on a jurisdiction-by-jurisdiction basis, e.g. in cases where there are insufficient data available at the domestic level and/or in order to reduce compliance costs where several entities of an MNE group have comparable functional analyses....
- TPG2022 Chapter III paragraph 3.39A transactional profit split method might in appropriate circumstances be considered without comparable data, e.g. where the absence of comparable data is due to the presence of unique and valuable intangibles contributed by each party to the transaction (see paragraph 2.119). However, even...
- TPG2022 Chapter III paragraph 3.29There are various sources of information that can be used to identify potential external comparables. This sub-section discusses particular issues that arise with respect to commercial databases, foreign comparables and information undisclosed to taxpayers. Additionally, whenever reliable internal comparables exist, it may be...
- TPG2022 Chapter III paragraph 3.27Step 4 of the typical process described at paragraph 3.4 is a review of existing internal comparables, if any. Internal comparables may have a more direct and closer relationship to the transaction under review than external comparables. The financial analysis may be easier...
- TPG2022 Chapter III paragraph 3.24A comparable uncontrolled transaction is a transaction between two independent parties that is comparable to the controlled transaction under examination. It can be either a comparable transaction between one party to the controlled transaction and an independent party (“internal comparableâ€) or between two...
- TPG2022 Chapter I paragraph 1.133In cases where similar controlled transactions are carried out by an MNE group in several countries and where the economic circumstances in these countries are in effect reasonably homogeneous, it may be appropriate for this MNE group to rely on a multiple-country comparability...
Related Case Law
- Panama vs “Petroleum Wholesale Corp”, September 2020, Administrative Tribunal, Case No TAT-RF-062“Petroleum Wholesale Corp” 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 documentation...
- Czech Republic vs. STARCOM INTERNATIONAL s.r.o., February 2021, Regional Court , Case No 25Af 18/2019 – 118A tax assessment had been issued for FY 2013 resulting in additional taxes of to CZK 227,162,210. At first the tax administration disputed that the applicant had purchased 1 TB SSDs for the purpose of earning, maintaining and securing income. It therefore concluded...
- Italy vs E.I S.r.l., February 2021, Administrative Court, Case No 12/02/2021 n. 546Transactions had taken place between E.I. S.r.l. and a related Spanish company, S. Sa. where the pricing had been determined based on the cost plus method. An assessment was issued by the tax authorities on the basis of a “comparable” transactions (internal CUP)...
- Italy vs Recordati Industria Chimica e Farmaceutica S.p.A, September 2017, Supreme Court, Case No 20805Recordati Industria Chimica e Farmaceutica S.p.A had been issued an assessment by the tax authorities for FY 2003 on various issues related to transfer pricing. Recordati Industria Chimica e Farmaceutica S.p.A. disagreed with the assessment and brought the case to court. The Regional...
- Philippines vs CYANAMID PHILIPPINES, INC, August 1995, Tax Court, CTA CASE No. 4724Cyanamid Philippines, INC was engaged in the marketing of various products in the areas of pharmaceutical, animal health and nutrition, and crop protection chemicals as well as medical devices. The tax authorities issued an assessment for deficiency income tax, arising from (a) overstatement of...