A Korean subsidiary of a Dutch electronics multinational was assessed for excess transfer prices paid to foreign related parties across medical equipment, household appliances, and lighting segments. Tax authorities aggregated maintenance services with product sales and selected comparables based on domestic service businesses. The Korean Supreme Court remanded the case for reexamination in 2025, finding the comparable selection methodology required further review ... Read more

Nestlé Zambia Limited recorded continuous losses, prompting the Zambia Revenue Authority to issue a transfer pricing assessment. The Tax Appeals Tribunal had invalidated the assessment over unsuitable comparables and methods. On appeal, the Zambia Supreme Court ruled in 2025 that the burden of proof rests with the taxpayer to disprove assessments, deciding largely in favour of the ZRA while addressing comparability and distributor classification issues ... Read more

Alcoa of Australia sold smelter-grade alumina to an unrelated Bahraini buyer under long-term contracts. Australian tax authorities assessed AUD 213 million in additional tax, arguing Alcoa had undercharged by over USD 420 million across 1993–2009. The Administrative Review Tribunal set aside the assessment in 2025, finding that Alcoa's pricing was consistent with or above arm's length prices when commercial terms and context were properly considered under the CUP method ... Read more

A Japanese conglomerate was assessed by tax authorities who applied a method they claimed was equivalent to the Transactional Net Margin Method to price transactions involving turbocharger parts and licences with a Thai affiliate. The taxpayer argued the method was not a valid TNMM equivalent. The Tokyo High Court upheld the 2023 Tokyo District Court ruling, deciding in favour of the taxpayer and rejecting the tax authority's assessment ... Read more

A Hungarian metal parts manufacturer for the automotive industry had reported continuous losses since 2012 while its parent group remained profitable. The tax authority reclassified it as a low-risk contract manufacturer and issued an adjustment treating the losses as a hidden service to the parent. The Supreme Administrative Court ruled predominantly in favour of the taxpayer in October 2024 and remanded the case for reconsideration ... Read more

Colombia's Supreme Administrative Court ruled in favour of the tax authority in a 2024 dispute over C.I. Banacol's FY2013 transfer pricing for related-party transactions. DIAN rejected the taxpayer's segmented approach and applied TNMM on an aggregated basis, arguing the transactions served a single commercial purpose. The court agreed, confirming that the interrelated fruit marketing transactions should be analysed collectively and that the selected comparables and interquartile range were appropriate ... Read more

A Korean subsidiary importing medical equipment, appliances and lighting products from related parties was audited after tax authorities rejected its business-line segmentation and functional analysis. Authorities reclassified activities and selected new comparables, issuing additional assessments. The Korean High Court ruled in favour of the taxpayer in August 2024, finding the authority's segmentation and comparable selection flawed ... Read more

BASF Argentina applied the TNMM using an aggregated operating margin across all business segments for the 2008 tax year. The Argentine tax authority challenged the aggregation, segmented results by function, and found chemical manufacturing fell below the interquartile range. It also disallowed three comparability adjustments. Argentina's National Tax Court upheld the authority's determination in August 2024, increasing BASF's taxable income by over ARS 5.6 million ... Read more

Eni Norge AS, a Norwegian subsidiary of the Eni Group, deducted costs for technical services purchased from Italian parent Eni SpA. Norwegian tax authorities reduced those deductions by over NOK 49 million across 2015 and 2016, finding internal hourly rates differed from external rates. The Court of Appeal upheld the assessment in June 2024, confirming the tax authority's arm's length adjustment was lawfully applied ... Read more

Puma Energy Bahamas SA, a petroleum products wholesaler in Panama, faced a $39 million taxable income adjustment for FY 2013–2014 after the Tax Administration identified inconsistencies in its transfer pricing documentation. The Administrative Tax Tribunal ruled in favour of the tax authority in 2020, and Panama's Supreme Court upheld that decision in 2024, confirming the gross margin benchmark analysis and comparability adjustments applied by the administration ... Read more

A Slovak Administrative Court ruled in favour of Marelli Slovakia in a 2024 transfer pricing case concerning intra-group sales of automotive components for FY 2012. The tax authority applied the TNMM and argued the company bore risks without control or decision-making power. The court sided with the taxpayer, addressing comparability analysis, risk allocation, and the legal status of the OECD Transfer Pricing Guidelines ... Read more

Toyota Kirloskar Motor challenged the separate benchmarking of royalty payments to its associated enterprises for FY 2018-19. The Indian tax authorities rejected entity-level TNMM, applying CUP instead and raising a transfer pricing adjustment of Rs. 279.84 crores. The Bangalore Income Tax Appellate Tribunal ruled mostly in favour of the taxpayer in January 2024, finding that royalty was sufficiently integrated with other transactions to justify aggregation under TNMM ... Read more

E Corp, a Japanese industrial manufacturer, supplied turbocharger parts and licensed technology to its Thai affiliate, Company A. Following an audit, Japanese tax authorities applied a method they deemed equivalent to the TNMM and issued a transfer pricing assessment. E Corp challenged the method's validity before the Tokyo District Court, which ruled in the taxpayer's favour in December 2023, finding the authority's approach did not qualify as a proper TNMM ... Read more

Danish tax authorities increased taxable income for Maersk Oil and Gas A/S for income years 2006–2008, challenging intra-group transfers of preliminary investigation results, exploration licences, and cost contributions to subsidiaries in Algeria and Qatar. The authorities argued transactions were not priced on arm's length terms. Denmark's Supreme Court upheld the adjustments in September 2023, ruling in favour of the tax authority ... Read more

Following Medtronic's $325 million acquisition of Israeli company Ventor Technologies Ltd in 2008–2009, the group entered into intercompany agreements but recognised no transfer of intangible assets for tax purposes. The Israeli tax authorities assessed additional taxable profits, finding all intangibles had been transferred to Medtronic. The District Court dismissed Ventor's appeal in June 2023, upholding the assessment and the recharacterisation of the transactions ... Read more

A Polish fast-moving goods distributor operating under a unilateral advance pricing agreement sought an individual interpretation on whether intra-group service costs should be included in its operating margin calculation under TNMM. The tax authority disputed the treatment of aggregated transactions and cost allocation. Poland's Supreme Administrative Court ruled in favour of the taxpayer in March 2023, upholding the arm's length operating margin methodology ... Read more

A Polish cosmetics distributor purchased goods from a related foreign company under a contract embedding a 3% trademark royalty within the goods price. The company sought a ruling that no withholding tax applied, arguing the royalty was ancillary to the main supply. Poland's Supreme Administrative Court dismissed the appeal in March 2023, upholding the tax authority's position that the trademark royalty payments were distinct and subject to withholding tax under Polish law and the applicable double tax treaty ... Read more

A Spanish transport company priced controlled transactions using gross margin comparisons, but tax authorities rejected this method due to comparability issues and applied TNMM, adjusting profits to the median. The Audiencia Nacional largely upheld the tax authority's approach in 2022, but ruled that adjustment to the median required established comparability defects. Since none were proven, the adjustment was reduced to the lower quartile ... Read more

The combined effect of multiple contemporaneous transactions, consisting either of multiple PCTs, or of one or more PCT and one or more other transactions in connection with a CSA that are not governed by this section (such as transactions involving cross operating contributions or make-or-sell rights), may require evaluation in accordance with the principles of aggregation described in § 1.482-1(f)(2)(i). In such cases, it may be that the multiple transactions are reasonably anticipated, as of the date of the PCT(s), to be so interrelated that the method that provides the most reliable measure of an arm’s length charge is a method under this section applied on an aggregate basis for the PCT(s) and other transactions. A section 482 adjustment may be made by comparing the aggregate arm’s length charge so determined to the aggregate payments actually made for the multiple transactions. In such a case, it generally will not be necessary to allocate separately the aggregate arm’s length charge as ... Read more

P and S are controlled taxpayers. P licenses a proprietary process to S for S’s use in manufacturing product X. Using its sales and marketing employees, S sells product X to related and unrelated customers outside the United States. If the license between P and S has economic substance, the Commissioner ordinarily will not restructure the taxpayer’s transaction to treat P as if it had elected to exploit directly the manufacturing process. However, because P could have directly exploited the manufacturing process and manufactured product X itself, this realistic alternative may be taken into account under § 1.482-4(d) in determining the arm’s length consideration for the controlled transaction. For examples of such an analysis, see Examples 7 and 8 in paragraph (f)(2)(i)(E) of this section and the Example in § 1.482-4(d)(2) ... Read more

The following example illustrates this paragraph (f)(2)(ii): ... Read more

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Allocating arm’s length compensation determined under an aggregate analysis – (i) P provides services to S1, which is incorporated in Country A. In connection with those services, P licenses intellectual property to S2, which is incorporated in Country B. S2 sublicenses the intellectual property to S1. (ii) Under paragraph (f)(2)(i)(B) of this section, if an aggregate analysis of the service and license transactions provides the most reliable measure of an arm’s length result, then an aggregate analysis must be performed. Under paragraph (f)(2)(i)(D) of this section, if an allocation of the value that results from such an aggregate analysis is necessary, for example, for purposes of sourcing the services income that P receives from S1 or determining deductible expenses incurred by S1, then the value determined under the aggregate analysis must be allocated using the method that provides the most reliable measure of the services income and deductible expenses ... Read more

Services provided using intangibles. – (i) P’s worldwide group produces and markets Product X and subsequent generations of products, which result from research and development performed by P’s R&D Team. Through this collaboration with respect to P’s proprietary products, the members of the R&D Team have individually and as a group acquired specialized knowledge and expertise subject to non-disclosure agreements (collectively, “knowhow”). (ii) P arranges for the R&D Team to provide research and development services to create a new line of products, building on the Product X platform, to be owned and exploited by S1 in the overseas market. P asserts that the arm’s length charge for the services is only reimbursement to P of its associated R&D Team compensation costs. (iii) Even though P did not transfer the platform or the R&D Team to S1, P is providing value associated with the use of the platform, along with the value associated with the use of the knowhow, to S1 by ... Read more

Aggregation of interrelated manufacturing and marketing intangibles governed by different statutes and regulations. The facts are the same as in Example 8 except that P transfers only the ROW intangibles related to manufacturing to S1 in an exchange described in section 351 and, upon entering into the CSA, then transfers the ROW intangibles related to marketing to S1 in a platform contribution transaction described in § 1.482-7(c) (rather than transferring all ROW intangibles only upon entering into the CSA or only in a prior exchange described in section 351). The value of the ROW intangibles that P transferred in the two transactions is greater in the aggregate, due to synergies among the different types of ROW intangibles, than if valued as two separate transactions. Under paragraph (f)(2)(i)(B) of this section, the arm’s length standard requires these synergies to be taken into account in determining the arm’s length results for the transactions ... Read more

Arm’s length compensation for equivalent provisions of intangibles under sections 351 and 482. P owns the worldwide rights to manufacturing and marketing intangibles that it uses to manufacture and market a product in the United States (“US intangibles”) and the rest of the world (“ROW intangibles”). P transfers all the ROW intangibles to S1 in an exchange described in section 351 and retains the US intangibles. Immediately after the exchange, P and S1 entered into a CSA described in § 1.482-7(b) that covers all research and development of intangibles conducted by the parties. A realistic alternative that was available to P and that would have involved the controlled parties performing similar functions, employing similar resources, and assuming similar risks as in the controlled transaction, was to transfer all ROW intangibles to S1 upon entering into the CSA in a platform contribution transaction described in § 1.482-7(c), rather than in an exchange described in section 351 immediately before entering into the CSA. Under paragraph (f)(2)(i)(A) of this ... Read more

Distinguishing provision of value from characterization – (i) P developed a collection of resources, capabilities, and rights (“Collection”) that it uses on an interrelated basis in ongoing research and development of computer code that is used to create a successful line of software products. P can continue to use the Collection on such interrelated basis in the future to further develop computer code and, thus, further build on its successful line of software products. Under § 1.482-7(g)(2)(ix), P determines that the interquartile range of the net present value of its own use of the Collection in future research and development and software product marketing is between $1000x and $1100x, and this range provides the most reliable measure of the value to P of continuing to use the Collection on an interrelated basis in future research, development, and exploitation. Instead, P enters into an exchange described in section 351 in which it transfers certain intangible property related to the Collection to S1 for ... Read more

Consideration of entire arrangement, including imputed contractual terms – (i) P conducts a business (“Business”) from the United States, with a worldwide clientele, but until Date X has no foreign operations. The success of Business significantly depends on intangibles (including marketing, manufacturing, technological, and goodwill or going concern value intangibles, collectively the “IP”), as well as ongoing support activities performed by P (including related research and development, central marketing, manufacturing process enhancement, and oversight activities, collectively “Support”), to maintain and improve the IP and otherwise maximize the profitability of Business. (ii) On Date X, Year 1, P contributes the foreign rights to conduct Business, including the foreign rights to the IP, to newly incorporated S1. S1, utilizing the IP of which it is now the owner, commences foreign operations consisting of local marketing, manufacturing, and back office activities in order to conduct and expand Business in the foreign market. (iii) Later, on Date Y, Year 1, P and S1 enter into ... Read more

Aggregation of interrelated patents. P owns 10 individual patents that, in combination, can be used to manufacture and sell a successful product. P anticipates that it could earn profits of $25x from the patents based on a discounted cash flow analysis that provides a more reliable measure of the value of the patents exploited as a bundle rather than separately. P licenses all 10 patents to S1 to be exploited as a bundle. Evidence of uncontrolled licenses of similar individual patents indicates that, exploited separately, each license of each patent would warrant a price of $1x, implying a total price for the patents of $10x. Under paragraph (f)(2)(i)(B) of this section, in determining the arm’s length royalty for the license of the bundle of patents, it would not be appropriate to use the uncontrolled licenses as comparables for the license of the bundle of patents, because, unlike the discounted cash flow analysis, the uncontrolled licenses considered separately do not reliably reflect the enhancement ... Read more

Non-aggregation of transactions that are not interrelated. P enters into a license agreement with S1 that permits S1 to use a proprietary process for manufacturing product X and to sell product X to uncontrolled parties throughout a specified region. P also sells to S1 product Y, which is manufactured by P in the United States and unrelated to product X. Product Y is resold by S1 to uncontrolled parties in the specified region. There is no connection between product X and product Y other than the fact that they are both sold in the same specified region. In evaluating whether the royalty paid by S1 to P for the use of the manufacturing process for product X and the transfer prices charged for unrelated product Y are arm’s length amounts, it would not be appropriate to consider the combined effects of these separate and unrelated transactions ... Read more

Aggregation and reliability of comparable uncontrolled transactions. The facts are the same as in Example 2. In addition, U1, U2, and U3 are uncontrolled taxpayers that carry out functions comparable to those of S1, S2, and S3, respectively, with respect to computers produced by unrelated manufacturers. R1, R2, and R3 constitute a controlled group of taxpayers (unrelated to the P controlled group) that carry out functions comparable to those of S1, S2, and S3 with respect to computers produced by their common parent. Prices charged to uncontrolled customers of the R group differ from the prices charged to customers of U1, U2, and U3. In determining whether the transactions of U1, U2, and U3, or the transactions of R1, R2, and R3, would provide a more reliable measure of the arm’s length result, it is determined that the interrelated R group transactions are more reliable than the wholly independent transactions of U1, U2, and U3, given the interrelationship of the P group transactions ... Read more

Aggregation of interrelated manufacturing, marketing, and services activities. S1 is the exclusive Country Z distributor of computers manufactured by P. S2 provides marketing services in connection with sales of P computers in Country Z and in this regard uses significant marketing intangibles provided by P. S3 administers the warranty program with respect to P computers in Country Z, including maintenance and repair services. In evaluating whether the transfer prices paid by S1 to P, the fees paid by S2 to P for the use of P marketing intangibles, and the service fees earned by S2 and S3 are arm’s length amounts, it would be appropriate to perform an aggregate analysis that considers the combined effects of these interrelated transactions if they are most reliably analyzed on an aggregated basis ... Read more

Aggregation of interrelated licensing, manufacturing, and selling activities. P enters into a license agreement with S1 that permits S1 to use a proprietary manufacturing process and to sell the output from this process throughout a specified region. S1 uses the manufacturing process and sells its output to S2, which in turn resells the output to uncontrolled parties in the specified region. In evaluating whether the royalty paid by S1 to P is an arm’s length amount, it may be appropriate to evaluate the royalty in combination with the transfer prices charged by S1 to S2 and the aggregate profits earned by S1 and S2 from the use of the manufacturing process and the sale to uncontrolled parties of the products produced by S1 ... Read more

The following examples illustrate the provisions of this paragraph (f)(2)(i). For purposes of the examples in this paragraph (E), P is a domestic corporation, and S1, S2, and S3 are foreign corporations that are wholly owned by P ... Read more

In some cases, it may be necessary to allocate one or more portions of the arm’s length result that was properly determined under a coordinated best method analysis described in paragraph (f)(2)(i)(C) of this section. Any such allocation of the arm’s length result determined under the coordinated best method analysis must be made using the method that, under the facts and circumstances, provides the most reliable measure of an arm’s length result for each allocated amount. For example, if the full value of compensation due in controlled transactions whose tax treatment is governed by multiple provisions of the Code or regulations has been most reliably determined on an aggregate basis, then that full value must be allocated in a manner that provides the most reliable measure of each allocated amount ... Read more

Consistent with the principles of paragraphs (f)(2)(i)(A) and (B) of this section, a coordinated best method analysis and evaluation of two or more controlled transactions to which one or more provisions of the Code or regulations apply may be necessary to ensure that the overall value provided, including any synergies, is properly taken into account. A coordinated best method analysis would include a consistent consideration of the facts and circumstances of the functions performed, resources employed, and risks assumed in the relevant transactions, and a consistent measure of the arm’s length results, for purposes of all relevant statutory and regulatory provisions ... Read more

The combined effect of two or more separate transactions (whether before, during, or after the year under review), including for purposes of an analysis under multiple provisions of the Code or regulations, may be considered if the transactions, taken as a whole, are so interrelated that an aggregate analysis of the transactions provides the most reliable measure of an arm’s length result determined under the best method rule of § 1.482-1(c). Whether two or more transactions are evaluated separately or in the aggregate depends on the extent to which the transactions are economically interrelated and on the relative reliability of the measure of an arm’s length result provided by an aggregate analysis of the transactions as compared to a separate analysis of each transaction. For example, consideration of the combined effect of two or more transactions may be appropriate to determine whether the overall compensation in the transactions is consistent with the value provided, including any synergies among items and services ... Read more

All value provided between controlled taxpayers in a controlled transaction requires an arm’s length amount of compensation determined under the best method rule of § 1.482-1(c). Such amount must be consistent with, and must account for all of, the value provided between the parties in the transaction, without regard to the form or character of the transaction. For this purpose, it is necessary to consider the entire arrangement between the parties, as determined by the contractual terms, whether written or imputed in accordance with the economic substance of the arrangement, in light of the actual conduct of the parties. See, e.g., § 1.482-1(d)(3)(ii)(B) (identifying contractual terms) and (f)(2)(ii)(A) (regarding reference to realistic alternatives) ... Read more

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(a) through (f) (2) [Reserved]. For further guidance see § 1.482-1(a) through (f)(2) ... Read more

Following Roche's 2010 acquisition of Israeli company Medingo Ltd for USD 160 million, the Israeli tax authority recharacterised a series of post-acquisition intercompany agreements as a single arrangement transferring all IP to Roche at the outset, issuing an assessment based on the full acquisition price. The District Court ruled in favour of the taxpayer in May 2022, rejecting the step-transaction recharacterisation ... Read more

An Indian subsidiary of Akzo Nobel paid fees to a Singapore group company for administrative support services and claimed a deduction of INR 19.4 million. The tax authority determined the arm's length price to be nil after the taxpayer failed to prove actual receipt of the services. The Income Tax Appellate Tribunal Delhi upheld the adjustment in 2022, confirming the burden of proof rests with the taxpayer ... Read more

The determination of the arm’s length compensation for a transfer of an ongoing concern does not necessarily amount to the sum of the separate valuations of each separate element that comprises the aggregate transfer. In particular, if the transfer of an ongoing concern comprises multiple contemporaneous transfers of interrelated assets, risks, or functions, valuation of those transfers on an aggregate basis may be necessary to achieve the most reliable measure of the arm’s length price for the ongoing concern. Valuation techniques that are used, in acquisition deals, between independent parties may prove useful to valuing the transfer of an ongoing concern between associated enterprises. The guidance on the use of valuation techniques for transactions involving the transfer of intangibles or rights in intangibles contained in Section D.2.6.3 of Chapter VI should be considered ... Read more

Intra-group arrangements for rendering services are sometimes linked to arrangements for transferring goods or intangibles (or the licensing thereof). In some cases, such as know-how contracts containing a service element, it may be very difficult to determine where the exact border lies between the transfer of intangibles or rights in intangibles and the provision of services. Ancillary services are frequently associated with the transfer of technology. It may therefore be necessary to consider the principles for aggregation and segregation of transactions in Chapter III where a mixed transfer of services and property is involved ... Read more

Paragraphs 3.9 to 3.12 and paragraph 3.37 provide guidance regarding the aggregation of separate transactions for purposes of transfer pricing analysis. Those principles apply fully to cases involving the transfer of intangibles or rights in intangibles and are supplemented by the guidance in Section C of this chapter. Indeed, it is often the case that intangibles may be transferred in combination with other intangibles, or in combination with transactions involving the sale of goods or the performance of services. In such situations it may well be that the most reliable transfer pricing analysis will consider the interrelated transactions in the aggregate as necessary to improve the reliability of the analysis ... Read more

Moreover, it should also be emphasised that determinations as to whether transactions should be aggregated or segregated for analysis usually involve the delineation of the actual transaction undertaken, by reference to written agreements and the actual conduct of the parties. Determinations regarding the actual transaction undertaken constitute one necessary element in determining the most appropriate transfer pricing method in the particular case ... Read more

In other situations, the provision of a service and the transfer of one or more intangibles may be so closely intertwined that it is difficult to separate the transactions for purposes of a transfer pricing analysis. For example, some transfers of rights in software may be combined with an undertaking by the transferor to provide ongoing software maintenance services, which may include periodic updates to the software. In situations where services and transfers of intangibles are intertwined, determining arm’s length prices on an aggregate basis may be necessary ... Read more

For example, a pharmaceutical product will often have associated with it three or more types of intangibles. The active pharmaceutical ingredient may be protected by one or more patents. The product will also have been through a testing process and a government regulatory authority may have issued an approval to market the product in a given geographic market and for specific approved indications based on that testing. The product may be marketed under a particular trademark. In combination these intangibles may be extremely valuable. In isolation, one or more of them may have much less value. For example, the trademark without the patent and regulatory marketing approval may have limited value since the product could not be sold without the marketing approval and generic competitors could not be excluded from the market without the patent. Similarly, the value of the patent may be much greater once regulatory marketing approval has been obtained than would be the case in the absence ... Read more

Intangibles (including limited rights in intangibles) may be transferred individually or in combination with other intangibles. In considering transactions involving transfers of combinations of intangibles, two related issues often arise ... Read more

Intangibles that are important to consider for transfer pricing purposes are not always recognised as intangible assets for accounting purposes. For example, costs associated with developing intangibles internally through expenditures such as research and development and advertising are sometimes expensed rather than capitalised for accounting purposes and the intangibles resulting from such expenditures therefore are not always reflected on the balance sheet. Such intangibles may nevertheless be used to generate significant economic value and may need to be considered for transfer pricing purposes. Furthermore, the enhancement to value that may arise from the complementary nature of a collection of intangibles when exploited together is not always reflected on the balance sheet. Accordingly, whether an item should be considered to be an intangible for transfer pricing purposes under Article 9 of the OECD Model Tax Convention can be informed by its characterisation for accounting purposes, but will not be determined by such characterisation only. Furthermore, the determination that an item should ... Read more