Comparisons of a taxpayer’s controlled transactions with other controlled transactions carried out by the same or another MNE group are irrelevant to the application of the arm’s length principle and therefore should not be used by a tax administration as the basis for a transfer pricing adjustment or by a taxpayer to support its transfer pricing policy.
TPG2022 Chapter III paragraph 3.25
Category: A. Performing a comparability analysis | Tag: Comparability analysis, Comparable uncontrolled price method (CUP), Comparing to other controlled transactions
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- TPG2022 Chapter I paragraph 1.40All methods that apply the arm’s length principle can be tied to the concept that independent enterprises consider the options realistically available to them and in comparing one option to another they consider any differences between the options that would significantly affect their...
- OECD COVID-19 TPG paragraph 29As with other analyses under the OECD TPG, numerous considerations may come into play, including the availability and choice of potential transfer pricing methods and comparables, and the interrelationship among them and the parameters of the testing periods (e.g. a transaction-based method may...
- 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 3.70In other instances, taxpayers might test the actual outcome of their controlled transactions to demonstrate that the conditions of these transactions were consistent with the arm’s length principle, i.e. on an ex post basis (hereinafter “the arm’s length outcome-testing” approach). Such test typically...
- TPG2022 Chapter III paragraph 3.4Below is a description of a typical process that can be followed when performing a comparability analysis. This process is considered an accepted good practice but it is not a compulsory one, and any other search process leading to the identification of reliable...
- TPG2022 Chapter III paragraph 3.27Step 4 of the typical process described at paragraph 3.4 is a review of existing internal comparables, if any. Internal comparables may have a more direct and closer relationship to the transaction under review than external comparables. The financial analysis may be easier...
- TPG2022 Chapter III paragraph 3.37The transactional focus of transfer pricing methods and the question of a possible aggregation of the taxpayer’s controlled transactions are discussed at paragraphs 3.9-3.12. A different question is whether non- transactional third party data can provide reliable comparables for a taxpayer’s controlled transactions...
- TPG2022 Chapter III paragraph 3.74Data from years following the year of the transaction may also be relevant to the analysis of transfer prices, but care must be taken to avoid the use of hindsight. For example, data from later years may be useful in comparing product life...
- 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...
- Australia finalises compliance guideline on intangibles migration arrangements – PCG 2024/117 January 2024 the Australian Taxation Office published the final version of its Practical Compliance Guideline PCG 2024/1 Intangibles migration arrangements. The PCG has previously been released in drafts as PCG 2021/D4 and PCG 2023/D2 Intangibles arrangements. The final version sets out ATO’s...
Related Case Law
- Tokyo District Court, judgment of November 24 2017In this case a Japanese company had entered into a series of controlled transactions with foreing group companies granting services and licences to use intangibles – know-how related to manufacturing and sales, training, and provided support by sending over technical experts. The company...
- Italy vs E.I S.r.l., February 2021, Administrative Court, Case No 12/02/2021 n. 546Transactions had taken place between E.I. S.r.l. and a related Spanish company, S. Sa. where the pricing had been determined based on the cost plus method. An assessment was issued by the tax authorities on the basis of a “comparable” transactions (internal CUP)...
- Italy vs E.I. S.r.l., February 2021, Regional Tax Commission, Case No 12/02/2021 n. 546/9Transactions had taken place between E.I. S.r.l. and a related Spanish company, S. SA, where the pricing had been determined based on the cost plus method. An assessment was issued by the tax authorities on the basis of a “comparable” transactions (internal CUP)...
- 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...