Non-operating items such as interest income and expenses and income taxes should be excluded from the determination of the net profit indicator. Exceptional and extraordinary items of a non-recurring nature should generally also be excluded. This however is not always the case as there may be situations where it would be appropriate to include them, depending on the circumstances of the case and on the functions being undertaken and risks assumed by the tested party. Even where exceptional and extraordinary items are not taken into account in the determination of the net profit indicator, it may be useful to review them because they can provide valuable information for the purpose of comparability analysis (for instance by reflecting that the tested party bears a given risk).
TPG2022 Chapter II paragraph 2.86
Category: B. Transactional net margin method | Tag: Elimination of interest income and expenses, Extraordinary income and costs, Transactional net margin method (TNMM), Transactional profit methods, Transfer pricing methods
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Related Case Law
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- 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...
- Greece vs “Tin Cup Ltd”, November 2022, Administrative Tribunal, Case No 3743/2022Following an audit of “Tin Cup Ltd” for FY 2016 and 2017 an assessment was issued by the tax authorities regarding excessive amounts of waste materials and pricing of intra-group transactions. On the issue of excessive amounts of waste materials, tax deductions was...
- Tanzania vs Amadeus Global Travel Distribution Limited, March 2026, Court of Appeal, Civil Appeal No. 227 of 2025Amadeus Global Travel Distribution Limited is a Tanzanian branch of a Kenya-resident entity, itself a wholly owned subsidiary of Amadeus ITG based in Madrid, Spain. The appellant's business consists of commercialising the Amadeus GDS system in Tanzania. The dispute concerned the income year...