OECD COVID-19 TPG paragraph 33

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Category: OECD Transfer Pricing Guidelines (2017) | Tag: , , ,
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In general, there is no overriding rule on the inclusion or exclusion of loss making comparables in the OECD TPG.15 Accordingly, loss-making comparables that satisfy the comparability criteria in a particular case should not be rejected on the sole basis that they suffer losses in periods affected by the COVID-19 pandemic.16 Consequently, when performing a comparability analysis for FY 2020, it may be appropriate to include loss-making comparables when the accurate delineation of the transaction indicates that those comparables are reliable (e.g. the comparables assume similar levels of risk and that have been similarly impacted by the pandemic).

15 Paragraph 3.64 of Chapter III of the OECD TPG.

16 Paragraph 3.65 of Chapter III of the OECD TPG.

Related Guidelines

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 and potentially in some cases, it may...
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 necessary to relax other comparability criteria, and...
TPG2022 Chapter III paragraph 3.65Generally speaking, a loss-making uncontrolled transaction should trigger further investigation in order to establish whether or not it can be a comparable. Circumstances in which loss-making transactions/ enterprises should be excluded from the list of comparables include cases where losses do not reflect normal business conditions, and where the losses...
TPG2022 Chapter III paragraph 3.63Extreme results might consist of losses or unusually high profits. Extreme results can affect the financial indicators that are looked at in the chosen method (e.g. the gross margin when applying a resale price, or a net profit indicator when applying a transactional net margin method). They can also affect...
OECD COVID-19 TPG paragraph 51When performing a comparability analysis, it may be necessary to specifically consider how exceptional costs arising from COVID-19 should be taken into account....
TPG2022 Chapter III paragraph 3.79The use of multiple year data does not necessarily imply the use of multiple year averages. Multiple year data and averages can however be used in some circumstances to improve reliability of the range. See paragraphs 3.57-3.62 for a discussion of statistical tools....
TPG2022 Chapter III paragraph 3.64An independent enterprise would not continue loss-generating activities unless it had reasonable expectations of future profits. See paragraphs 1.149-1.151. Simple or low risk functions in particular are not expected to generate losses for a long period of time. This does not mean however that loss-making transactions can never be comparable....
TPG2022 Chapter III paragraph 3.57It may also be the case that, while every effort has been made to exclude points that have a lesser degree of comparability, what is arrived at is a range of figures for which it is considered, given the process used for selecting comparables and limitations in information available on...
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 and should reflect the most meaningful economic...
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 of Employees. The size of the transaction...

Supplemental Guidance

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 and potentially in some cases, it may...
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 necessary to relax other comparability criteria, and...
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