The 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 means that none of the differences (if any) between the situations being compared could materially affect the condition being examined in the methodology or that reasonably accurate adjustments can be made to eliminate the effect of any such differences. Whether comparability adjustments should be performed (and if so, what adjustments should be performed) in a particular case is a matter of judgment that should be evaluated in light of the discussion of costs and compliance burden at Section C.
TPG2022 Chapter III paragraph 3.47
Category: A. Performing a comparability analysis | Tag: Comparability adjustments, Comparability analysis, Comparable search, Comparables, Search criteria
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- OECD COVID-19 TPG paragraph 28This aspect is also relevant in performing the comparability analysis. For instance, assume government intervention forces a taxpayer to close its distribution facilities for three months. In undertaking a benchmark analysis, care should be taken in verifying that comparable enterprises have faced similar...
- TPG2022 Chapter III paragraph 3.46The 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...
- 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”...
- 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,...
- 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...
- TPG2022 Chapter X paragraph 10.20In an ideal scenario, a comparability analysis would enable the identification of financial transactions between independent parties which match the tested transaction in all respects. With the many variables involved, it is more likely that potential comparables will differ from the tested transaction....
- Accessing Comparables Data – A Toolkit on Comparability and Mineral pricingThe Platform for Collaboration on Tax (IMF, OECD, UN and the WBG) has published a toolkit for addressing difficulties in accessing comparables Data for Transfer Pricing Analyses. The Toolkit Includes a supplementary report on addressing the information gaps on prices of Minerals Sold...
Related Case Law
- Ukrain vs Olympex Coupe International LLC, December 2023, Administrative Court of Appeal, Case № 420/19747/21Following 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....
- 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...
- Colombia vs Monómeros Colombo Venezolanos SA, May 2025, Supreme Administrative Court, Case No. 08001-23-33-000-2019-00690-01 (25943)A Colombian company had interest deductions on loans from a British Virgin Islands related party disallowed after tax authorities found its transfer pricing documentation deficient. The taxpayer relied solely on US corporate bond comparables, which authorities rejected as insufficiently similar. Colombia's Supreme Administrative...
- 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...
- 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...