However, it is not appropriate to apply a transactional profit method merely because data concerning uncontrolled transactions are difficult to obtain or incomplete in one or more respects. The same criteria listed in paragraph 2.2 that were used to reach the initial conclusion that none of the traditional transactional methods could be reliably applied under the circumstances must be considered again in evaluating the reliability of the transactional profit method.
TPG2022 Chapter II paragraph 2.5
Category: A. Selection of the most appropriate transfer pricing method | Tag: Data difficult to obtain, Lack of comparables, Most appropriate method (MAM), Transfer pricing methods
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- TPG2022 Chapter II paragraph 2.143In general, it will tend to be the case that the presence of factors indicating that a transactional profit split is the most appropriate method will correspond to an absence of factors indicating that an alternative transfer pricing method – one which relies...
- TPG2022 Chapter VI paragraph 6.139Where information regarding reliable comparable uncontrolled transactions cannot be identified, the arm’s length principle requires use of another method to determine the price that uncontrolled parties would have agreed under comparable circumstances. In making such determinations, it is important to consider: The functions,...
- TPG2022 Chapter VI paragraph 6.138However, it will often be the case in matters involving transfers of intangibles or rights in intangibles that the comparability analysis (including the functional analysis) reveals that there are no reliable comparable uncontrolled transactions that can be used to determine the arm’s length...
- TPG2022 Chapter II paragraph 2.7In no case should transactional profit methods be used so as to result in over-taxing enterprises mainly because they make profits lower than the average, or in under-taxing enterprises that make higher than average profits. There is no justification under the arm’s length...
- 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 VI paragraph 6.141Care should be used, in applying certain of the OECD transfer pricing methods in a matter involving the transfer of intangibles or rights in intangibles. One sided methods, including the resale price method and the TNMM, are generally not reliable methods for directly...
Related Case Law
- Spain vs MAHOU (SAN MIGUEL) S.A., December 2021, Audiencia Nacional, Case No SAN 5537/2021 – ECLI:ES:AN:2021:5537The Mahou (SAN MIGUEL) S.A Group is active in brewing and sale of beers. Penibética de cervezas y bebidas SL and Andaluza de cervezas y bebidas SL are wholly owned by Cervezas Alhambra SL, which again is owned by MAHOU (SAN MIGUEL) S.A....
- India vs BG Exploration and Production Ltd., April 2017, Income Tax Appellate Tribunal Delhi, Case no. 2227/Del/2014 & CO 13/Del/2015BG Exploration and Production Ltd. had determined the remuneration for various services provided on an aggregated basis by applying the TNMM method using profit to sales as the Profit Level Indicator. The tax authorities found that a CUP method was the most appropriate...
- Spain vs Transalliance Iberica SA, November 2022, Audiencia Nacional, Case No SAN 5336/2022 – ECLI:EN:AN:2022:5336Transalliance Iberica SA had priced its controlled transactions for the years 2008-2013 by comparing the gross margin achieved on an overall basis with the gross margins of comparable companies. Following an audit, the tax authorities issued a notice of assessment rejecting the method...
- Spain vs Universal Pictures International Spain SL, December 2022, Audiencia Nacional, Case No SAN 5855/2022 – ECLI:EN:AN:2022:5855Universal Pictures International Spain SL is a distributor of films on the Spanish Market. It distributes films both from related parties (Universal Pictures) and from unrelated parties. Following an audit, the Spanish tax authorities issued an assessment where the remuneration received for distribution...
- Spain vs Ferroli España, S.L.U., May 2023, Audiencia Nacional, Case No 3400/2023 – ECLI:EN:AN:2023:3400Ferroli España, S.L.U. is a Spanish manufacturer manufacture of cookers and heaters. In FY 2010 and 2011 the company had various transactions with other companies in the Ferroli Group and reported negative profit margins on these transactions. According to the company this was...