TPguidelines

It may be reasonable in some circumstances to analyse the transfer prices for product lines or other groupings rather than to ascertain an arm’s length price for each individual product or sale. An enterprise may find it necessary to sell some products at less than the market price or even supply them free in order to make a higher profit on its sales of products overall to the same buyer. A clothing enterprise may, for example, make a loss on its small and large garments in order to be able to sell a complete range and make its profits from the medium sizes. An electric appliance enterprise may sell light bulbs at a loss in order to sell electric fittings, lampshades, etc. and make its profits in that way. Likewise, a producer may sell new products at a comparably low price and make his profits on the replacement market or through the repair of the products, or through the sale of auxiliary material, for example film for cameras. In such cases, an unusually low or high price would, however, have to be examined closely and substantiated by cogent evidence, and the prices realised on resale by the buyer could be relevant.