TPG2022 Chapter III paragraph 3.46

Category: A. Performing a comparability analysis | Tag: , , , , ,
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The process followed to identify potential comparables is one of the most critical aspects of the comparability analysis and it should be transparent, systematic and verifiable. In particular, the choice of selection criteria has a significant influence on the outcome of the analysis and should reflect the most meaningful economic characteristics of the transactions compared. Complete elimination of subjective judgments from the selection of comparables would not be feasible, but much can be done to increase objectivity and ensure transparency in the application of subjective judgments. Ensuring transparency of the process may depend on the extent to which the criteria used to select potential comparables are able to be disclosed and the reasons for excluding some of the potential comparables are able to be explained. Increasing objectivity and ensuring transparency of the process may also depend on the extent to which the person reviewing the process (whether taxpayer or tax administration) has access to information regarding the process followed and to the same sources of data. Issues of documentation of the process of identifying comparables are discussed in Chapter V.






Related Guidelines

  1. TPG2022 Chapter III paragraph 3.43In practice, both quantitative and qualitative criteria are used to include or reject potential comparables. Examples of qualitative criteria are found in product portfolios and business strategies. The most commonly observed quantitative criteria are: Size criteria in terms of Sales, Assets or Number...
  2. OECD COVID-19 TPG paragraph 31The COVID-19 pandemic has created economic conditions that often differ from those of previous years. In these circumstances, where a taxpayer rolls forward an existing set of comparables to cover FY2020, it may be necessary to review the suitability of these existing comparables...
  3. OECD COVID-19 TPG paragraph 32For example, assume that geographic comparability is deemed as the most relevant comparability factor given the nature of the effects of COVID-19 in a particular market. In these circumstances, in order to obtain reliable data from a particular market it may potentially be...
  4. TPG2022 Chapter III paragraph 3.47The need to adjust comparables and the requirement for accuracy and reliability are pointed out in these Guidelines on several occasions, both for the general application of the arm’s length principle and more specifically in the context of each method. To be comparable...
  5. TPG2022 Chapter III paragraph 3.45It would not be appropriate to give systematic preference to one approach over the other because, depending on the circumstances of the case, there could be value in either the “additive” or the “deductive” approach, or in a combination of both. The “additive”...
  6. TPG2022 Chapter III paragraph 3.44One advantage of the “deductive” approach is that it is more reproducible and transparent than the “additive”. It is also easier to verify because the review concentrates on the process and on the relevance of the selection criteria retained. On the other hand,...


Related Case Law

  1. Ukrain vs Olympex Coupe International LLC, February 2024, Supreme Court, Case № К/990/675/24Following a tax audit, the tax authorities concluded that the most appropriate method for determining Olympex’s income was the Transactional Net Margin Method (TNMM). However, in addition to the search criteria used by Olympex, the tax authorities added geographical and company size criteria....
  2. Panama vs “Logistics SA”, August 2025, Administrative Court, Case No TAT-RF-044 (Exp. 126-2023)A Panamanian air freight logistics company applied TNMM with return on total costs for its 2015 intercompany transactions. Tax authorities rejected eight of nine comparables and recalculated results using a single comparable, producing a near-zero margin. Panama's Administrative Tax Court ruled in favour...
  3. Korea vs “Acrylic-resin manufacturer Corp” April 2025, Review Board, Case no 적부광주청 2025-0001A Korean acrylic-resin manufacturer was assessed for FY 2020–2022 across multiple related-party transactions, including sales to a sister company, seconded employee costs, underpriced guarantee fees, and excessive technical support fees. The company argued all transactions were arm's length and supported by comparability analyses....
  4. Korea vs “Car Lrd Corp” April 2025, Tax Tribunal, Case no 조심2023서9158A Korean limited risk distributor importing and selling vehicles incurred substantial losses between 2017 and 2021 following a regulatory sales suspension, undertaking market penetration measures funded partly by parent reimbursements. The tax authority disputed the treatment of those compensations as non-operating income. The...
  5. Ukrain vs Viva Decor TOV, January 2025, Supreme Administrative Court, Case № К/990/44061/23A Ukrainian wallpaper manufacturer challenged tax assessments covering FY 2013–2015, where authorities insisted only partial-year data should be used to calculate TNMM profit level indicators for controlled transaction periods. The company argued full-year figures were appropriate given the seasonal nature of wallpaper demand...