Because transfer pricing is not an exact science, it will not always be possible to determine the single correct arm’s length price; rather, as Chapter III recognises, the correct price may have to be estimated within a range of acceptable figures. Also, the choice of methodology for establishing arm’s length transfer pricing will not often be unambiguously clear. Taxpayers may experience particular difficulties when the tax administration proposes to use a methodology, for example a transactional profit method, that is not the same as that used by the taxpayer.
TPG2017 Chapter IV paragraph 4.8
Category: B. Transfer pricing compliance practices, OECD Transfer Pricing Guidelines (2017), TPG2017 Chapter IV: Administrative Dispute Resolution | Tag: Arm’s length range, Audit practices, Different Method, Most appropriate method (MAM), Use same method as taxpayer
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Next » Related Guidelines
- TPG2022 Chapter IV paragraph 4.9In a difficult transfer pricing case, because of the complexity of the facts to be evaluated, even the best-intentioned taxpayer can make an honest mistake. Moreover, even the best-intentioned tax examiner may draw the wrong conclusion from the facts. Tax administrations are encouraged...
- TPG2022 Chapter II paragraph 2.2The selection of a transfer pricing method always aims at finding the most appropriate method for a particular case. For this purpose, the selection process should take account of the respective strengths and weaknesses of the OECD recognised methods; the appropriateness of the...
- TPG2022 Chapter IV paragraph 4.8Because transfer pricing is not an exact science, it will not always be possible to determine the single correct arm’s length price; rather, as Chapter III recognises, the correct price may have to be estimated within a range of acceptable figures. Also, the...
- TPG2022 Chapter II paragraph 2.4There are situations where transactional profit methods are found to be more appropriate than traditional transaction methods. For example, cases where each of the parties makes unique and valuable contributions in relation to the controlled transaction, or where the parties engage in highly...
- TPG2022 Chapter II paragraph 2.129It may also be relevant to consider industry practices. For instance, if information is available that independent parties do commonly use profit splitting approaches in similar situations, careful consideration should be given to whether the transactional profit split method may be the most...
- TPG2022 Chapter II paragraph 2.118While there is no requirement in these Guidelines to undertake exhaustive analysis or testing of every method in each case, the selection of the most appropriate method should take into account the relative appropriateness and reliability of the selected method as compared to...
- TPG2022 Chapter II paragraph 2.6Methods that are based on profits can be accepted only insofar as they are compatible with Article 9 of the OECD Model Tax Convention, especially with regard to comparability. This is achieved by applying the methods in a manner that approximates arm’s length...
- TPG2022 Chapter IV paragraph 4.10A tax administration should keep in mind in allocating its audit resources the taxpayer’s process of setting prices, for example whether the MNE group operates on a profit centre basis. See paragraph 1.5....
- OECD releases text of the new MLC to Implement Amount A of Pillar One11 October 2023 the OECD/G20 Inclusive Framework has released the text of a new multilateral convention that updates the international tax framework to co-ordinate a reallocation of taxing rights to market jurisdictions, improve tax certainty, and remove digital service taxes. The Multilateral Convention to...
- July 2018: Transfer Pricing Practices in the Oil Sector, and their Potential Application to MiningIn July 2018 Center for Global Development published a study of special transfer pricing practices in the oil sector, and their potential application to hard rock minerals. According to the study, governments of mining countries are vulnerable to investors manipulating transfer prices as...
Related Case Law
- Italy vs Ferrari SpA, September 2022, Supreme Court, Case No 26695/2022In February 2016 the Regional Tax Commission rejected an appeal filed by the Revenue Agency against the first instance judgment, which had upheld an appeal brought by Italian car manufacturer, Ferrari S.p.A. against a notice of assessment issued by the Revenue Agency in...
- India vs Sabic India Pvt Ltd, June 2021, Income Tax Appellate Tribunal – Delhi, ITA No.454/Del/2021Sabic India Pvt Ltd was primarily engaged in providing marketing support services to facilitate the selling of fertilizers and chemicals in India on behalf of the Sabic Group holding company. The Indian company did not hold any title to inventories and all products...
- India vs Olympus Medical Systems India Pvt. Ltd., April 2022, Income Tax Appellate Tribunal – New Delhi, Case No 838/DEL/2021Olympus Medical Systems India is a subsidiary of Olympus Corp and engaged in the import, sale and maintenance of medical equipment in India. For FY 2012 and 2013 the company reported losses. An transfer pricing audit was initiated by the tax authorities and...
- India vs Toyota Kirloskar Auto Parts Private Limited, March 2020, Income Tax Appellate Tribunal – BANGALORE, Case No IT(TP) No.1915/Bang/2017 & 3377/Bang/2018Toyota Kirloskar Auto Parts Private Limited manufactures auto parts and sold them to Toyota Kirloskar Motors Limited, another Indian corporation in the Toyota Group. In FY 2013-14 Toyota Kirloskar Auto Parts Private Limited paid a 5% royalty to the Japanese parent Toyota Motor Corporation...