§ 1.482-6(c)(2)(ii) Comparability and reliability considerations –
Posted on | By Internal Revenue Service
Category: US IRC Section 482 on Transfer Pricing, § 1.482-6 Profit split method | Tag: Best Method Rule, Comparable profit split method, Profit split method
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- TPG2022 Chapter III paragraph 3.39 A transactional profit split method might in appropriate circumstances be considered without comparable data, e.g. where the absence of comparable data is due to the presence of unique and valuable intangibles contributed by each party to the transaction (see paragraph 2.119). However, even in cases where comparable data are scarce...
- TPG2022 Chapter II paragraph 2.170 Depending on the facts and circumstances of the case, the factor can be a figure (e.g. a 30%-70% split based on evidence of a similar split achieved between independent parties in comparable transactions), or a variable (e.g. relative value of participant’s marketing contributions or other possible factors as discussed below)...
- TPG2022 Chapter II paragraph 2.154 The relevant profits to be split under the transactional profit split method are those of the associated enterprises arising as a result of the controlled transactions under review. It is essential to identify the level of aggregation, see paragraphs 3.9-3.12. In determining the relevant profits, it is therefore essential to...
- TPG2022 Chapter II paragraph 2.138 Where the contributions are highly inter-related or inter-dependent upon each other, the evaluation of the respective contributions of the parties may need to be done holistically. That is, a high degree of integration may also affect whether contributions by the enterprises are considered to be unique and valuable. For instance,...
- TPG2022 Chapter II paragraph 2.122 A further strength of the transactional profit split method is that all relevant parties to the transaction are directly evaluated as part of the pricing of the transaction, that is, the contributions of each party to the transaction are specifically identified and their relative values measured in order to determine...
- TPG2022 Chapter VI paragraph 6.211 In applying a profit split method in a case involving the use of intangibles, care should be taken to identify the intangibles in question, to evaluate the manner in which those intangibles contribute to the creation of value, and to evaluate other income producing functions performed, risks assumed and assets...
- TPG2022 Chapter VI paragraph 6.152 Where limited rights in fully developed intangibles are transferred in a licence or similar transaction, and reliable comparable uncontrolled transactions cannot be identified, a transactional profit split method can often be utilised to evaluate the respective contributions of the parties to earning the relevant income. The profit contribution of the...
- TPG2022 Chapter II Annex II example 13 65. Company A, resident in Country A, is the parent company of Retail Group, an MNE group engaged in the retail fashion industry. Over the years, Company A has developed know-how and has enhanced the value of the trademark and associated goodwill of its business through intensive marketing activities. In...