The most reliable approach in identifying reliable comparables will be to refer, where possible, to data regarding comparable uncontrolled transactions in the same or comparable geographic market between independent enterprises performing similar functions, assuming similar risks, and using similar assets.
OECD COVID-19 TPG paragraph 84
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By OECD
Category: OECD Transfer Pricing Guidelines (2017) | Tag: Comparables, COVID-19, Geographic market, Government assistance, Government interventions
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- OECD COVID-19 TPG paragraph 83For example, as government assistance and the specific circumstances of the COVID-19 pandemic may vary across different markets, it may affect the comparables and the arm’s length prices of uncontrolled transactions in different ways.39 For instance, assume Company D, a member of an MNE group, provides manufacturing services and receives...
- OECD COVID-19 TPG paragraph 85The materiality of the change in economically relevant circumstances created by the impact of government assistance available in a market may impose additional challenges to the comparability analysis. It may for example render it more difficult to apply the comparability analysis through the utilisation and/or the application of a particular...
- OECD COVID-19 TPG paragraph 27As a pragmatic means of addressing divergent economic conditions in the pre- or post-pandemic period, and when the pandemic was in effect and its effects on economic conditions were material, it may be appropriate to have separate testing periods (and periods considered for price setting) for the duration of the...
- OECD COVID-19 TPG paragraph 74The economically relevant characteristics of the accurately delineated controlled transaction will help in determining the potential effect of the receipt of government assistance on the pricing of the controlled transaction, if any. For instance, some of the aspects to consider in analysing the impact, if any, of the receipt of...
- OECD COVID-19 TPG paragraph 82The comparability of open market transactions or enterprises may be influenced by the receipt of government assistance, affecting both how the parties establish their commercial or financial relations and how they price their transactions. Therefore, when performing a comparability analysis, it may be necessary to take into account the receipt...
- OECD COVID-19 TPG paragraph 86Finally, when applying a one-sided method such as the resale price method, the cost plus method, or the TNMM, the accounting treatment of the government assistance in both the tested party and any comparable may need to be specifically identified, especially when the tested party and the comparables apply different...
- OECD COVID-19 TPG paragraph 21The difficulty posed by the delayed availability of contemporaneous data on comparable companies or transactions may have been exacerbated by the COVID-19 pandemic. Taxpayers and tax administrations should be mindful that determining a reliable arm’s length outcome requires flexibility and the exercise of good judgment.10 Difficult transfer pricing issues that...
- 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 means that none of the differences (if...
- TPG2022 Chapter III paragraph 3.29There are various sources of information that can be used to identify potential external comparables. This sub-section discusses particular issues that arise with respect to commercial databases, foreign comparables and information undisclosed to taxpayers. Additionally, whenever reliable internal comparables exist, it may be unnecessary to search for external ones, see...
- TPG2022 Chapter I paragraph 1.159Paragraphs 1.130, 1.132 and 6.120 indicate that features of the geographic market in which business operations occur can affect comparability and arm’s length prices. Difficult issues can arise in evaluating differences between geographic markets and in determining appropriate comparability adjustments. Such issues may arise in connection with the consideration of cost...
Supplemental Guidance
- OECD COVID-19 TPG paragraph 83For example, as government assistance and the specific circumstances of the COVID-19 pandemic may vary across different markets, it may affect the comparables and the arm’s length prices of uncontrolled transactions in different ways.39 For instance, assume Company D, a member of an MNE group, provides manufacturing services and receives...
- OECD COVID-19 TPG paragraph 85The materiality of the change in economically relevant circumstances created by the impact of government assistance available in a market may impose additional challenges to the comparability analysis. It may for example render it more difficult to apply the comparability analysis through the utilisation and/or the application of a particular...