If the relevant condition of the controlled transaction (e.g. price or margin) falls outside the arm’s length range asserted by the tax administration, the taxpayer should have the opportunity to present arguments that the conditions of the controlled transaction satisfy the arm’s length principle, and that the result falls within the arm’s length range (i.e. that the arm’s length range is different from the one asserted by the tax administration). If the taxpayer is unable to establish this fact, the tax administration must determine the point within the arm’s length range to which it will adjust the condition of the controlled transaction.
TPG2017 Chapter III paragraph 3.61
Category: A. Performing a comparability analysis, OECD Transfer Pricing Guidelines (2017), TPG2017 Chapter III: Comparability Analysis | Tag: Arm’s length range, Comparability analysis, Falls outside the arm's length range, Interquartile range (IQR), Median
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Next » Related Guidelines
- TPG2022 Chapter III paragraph 3.62In determining this point, where the range comprises results of relatively equal and high reliability, it could be argued that any point in the range satisfies the arm’s length principle. Where comparability defects remain as discussed at paragraph 3.57, it may be appropriate...
- TPG2022 Chapter III paragraph 3.61If the relevant condition of the controlled transaction (e.g. price or margin) falls outside the arm’s length range asserted by the tax administration, the taxpayer should have the opportunity to present arguments that the conditions of the controlled transaction satisfy the arm’s length...
- TPG2022 Chapter III paragraph 3.56In some cases, not all comparable transactions examined will have a relatively equal degree of comparability. Where it is possible to determine that some uncontrolled transactions have a lesser degree of comparability than others, they should be eliminated....
- TPG2022 Chapter III paragraph 3.60If the relevant condition of the controlled transaction (e.g. price or margin) is within the arm’s length range, no adjustment should be made....
- TPG2022 Chapter III paragraph 3.59Where the application of the most appropriate method (or, in relevant circumstances, of more than one method, see paragraph 2.12), produces a range of figures, a substantial deviation among points in that range may indicate that the data used in establishing some of...
- 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...
- TPG2022 Chapter I paragraph 1.34The typical process of identifying the commercial or financial relations between the associated enterprises and the conditions and economically relevant circumstances attaching to those relations requires a broad-based understanding of the industry sector in which the MNE group operates (e.g. mining, pharmaceutical, luxury...
- TPG2022 Chapter III paragraph 3.26The presence of minority shareholders may be one factor leading to the outcomes of a taxpayer’s controlled transactions being closer to arm’s length, but it is not determinative in and of itself. The influence of minority shareholders depends on a number of factors,...
- 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...
- OECD Publishes Manual on Bilateral Advance Pricing ArrangementOn 28 September 2022 OECD published a new manual for entering bilateral advance pricing arrangement (APA’s) which has been approved by the Inclusive Framework on BEPS, as well as all members of the FTA, on 6 July 2022. The Bilateral Advance Pricing Arrangement...
Related Case Law
- Spain vs “SGGE W T Spanish branch”, January 2023, TEAC, Case No Rec. 00/07503/2020/00/00SGGE W T is a Spanish branch of SGG that carries out distribution and marketing activities related to the information technology network products and services. SGG is part of the KF group which “is an international group that provides solutions and services in...
- 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....
- Portugal vs “A-Contract Manufacturer LDA”, December 2020, CAAD Tax Arbitration, Case No 808/2019-TA-Contract Manufacturer LDA is an entity residing in Portugal, whose main activity is contract manufacturing of coffee machines and irons, as well as spare parts, tools etc. on behalf of its German parent B A.G. Following an audit, the tax authorities found that...
- Romania vs “Electrolux” A. SA, November 2020, Supreme Court, Case No 6059/2020In this case, a Romanian manufacturer and distributor (A. SA) in the Electrolux group (C) had been loss making while the group as a whole had been profitable. The tax authorities issued an assessment, where the profit of A. SA had been determined...