The identification of potential comparables has to be made with the objective of finding the most reliable data, recognising that they will not always be perfect. For instance, independent transactions may be scarce in certain markets and industries. A pragmatic solution may need to be found, on a case-by-case basis, such as broadening the search and using information on uncontrolled transactions taking place in the same industry and a comparable geographical market, but performed by third parties that may have different business strategies, business models or other slightly different economic circumstances; information on uncontrolled transactions taking place in the same industry but in other geographical markets; or information on uncontrolled transactions taking place in the same geographical market but in other industries. The choice among these various options will depend on the facts and circumstances of the case, and in particular on the significance of the expected effects of comparability defects on the reliability of the analysis.
TPG2017 Chapter III paragraph 3.38
Category: A. Performing a comparability analysis, OECD Transfer Pricing Guidelines (2017), TPG2017 Chapter III: Comparability Analysis | Tag: Broadening the search, Comparability analysis, Comparability defects, Comparable uncontrolled price method (CUP), External comparables, Lack of comparables, Most reliable data
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Next » Related Guidelines
- 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 I paragraph 1.131The existence of a cycle (e.g. economic, business, or product cycle) is one of the economic circumstances that should be identified. See paragraph 3.77 in relation to the use of multiple year data where there are cycles....
- TPG2022 Chapter I paragraph 1.135Business strategies also could include market penetration schemes. A taxpayer seeking to penetrate a market or to increase its market share might temporarily charge a price for its product that is lower than the price charged for otherwise comparable products in the same...
- TPG2022 Chapter I paragraph 1.130Arm’s length prices may vary across different markets even for transactions involving the same property or services; therefore, to achieve comparability requires that the markets in which the independent and associated enterprises operate do not have differences that have a material effect on...
- TPG2022 Chapter III paragraph 3.38The identification of potential comparables has to be made with the objective of finding the most reliable data, recognising that they will not always be perfect. For instance, independent transactions may be scarce in certain markets and industries. A pragmatic solution may need...
- TPG2022 Chapter IX paragraph 9.111Another example of a possible application of the CUP method would be the case where independent parties provide manufacturing, selling or service activities comparable to the ones provided by the restructured affiliate. Given the recent development of outsourcing activities, it may be possible...
- TPG2022 Chapter I paragraph 1.37Economically relevant characteristics or comparability factors are used in two separate but related phases in a transfer pricing analysis. The first phase relates to the process of accurately delineating the controlled transaction for the purposes of this chapter, and involves establishing the characteristics...
- TPG2022 Chapter III paragraph 3.63Extreme results might consist of losses or unusually high profits. Extreme results can affect the financial indicators that are looked at in the chosen method (e.g. the gross margin when applying a resale price, or a net profit indicator when applying a transactional...
- 2018: ATO Taxpayer Alert on Mischaracterisation of activities or payments in connection with intangible assets (TA 2018/2)The ATO is currently reviewing international arrangements that mischaracterise intangible assets[1] and/or activities or conditions connected with intangible assets. The concerns include whether intangible assets have been appropriately recognised for Australian tax purposes and whether Australian royalty withholding tax obligations have been met. Arrangements...
- EU: Public Country-by-Country Reporting?Proposal directive of public country-by-country reporting in the EU Ministers held an exchange of views (public session) on how to take the proposed directive forward. Tax transparency is a fundamental principle in any democratic society. It enables policy makers to take informed decisions...
Related Case Law
- Spain vs “Benchmark SA”, November 2021, TEAC, Case No Rec. 4881/2019The tax authorities excluded some of the entities selected by the taxpayer in a benchmark study, as it considered that they did not meet the necessary comparability requirements, and also included some of the excluded entities, as it considered that they were comparable....
- Slovenia vs “VAT Corp”, Februar 2018, Administrative Court, Case No I-U-861/2016-14The court ruled that, based on all the findings in the proceedings (the plaintiff did not provide documentation, did not follow the tax authority’s instructions), the tax authority had the possibility to establish the tax base by assessment pursuant to Article 68 of...
- Norway vs Normet Norway AS, March 2019, Borgarting Lagmannsrett, Case No 2017-202539In January 2013 the Swiss company Normet International Ltd acquired all the shares in the Norwegian company Dynamic Rock Support AS (now Normet Norway AS) for a price of NOK 78 million. In February 2013 all intangibles in Dynamic Rock Support AS was...
- Bulgaria vs “Beltart Manufacturing”, May 2020, Supreme Administrative Court, Case No 5756“Beltart Manufacturing” is a Bulgarian toll-manufacturer of of clothing accessories – trouser belts etc. – and is a member of the German Beltart Group. The remuneration for the manufactoring services provided to the group for 2013 and 2014 had been lower than for...