Tag: Purchase volumes

TPG2022 Chapter III paragraph 3.28

On the other hand, internal comparables are not always more reliable and it is not the case that any transaction between a taxpayer and an independent party can be regarded as a reliable comparable for controlled transactions carried on by the same taxpayer. Internal comparables where they exist must satisfy the five comparability factors in the same way as external comparables, see paragraphs 1.33-1.138. Guidance on comparability adjustments also applies to internal comparables, see paragraphs 3.47-3.54. Assume for instance that a taxpayer manufactures a particular product, sells a significant volume thereof to its foreign associated retailer and a marginal volume of the same product to an independent party. In such a case, the difference in volumes is likely to materially affect the comparability of the two transactions. If it is not possible to make a reasonably accurate adjustment to eliminate the effects of such difference, the transaction between the taxpayer and its independent customer is unlikely to be a reliable ... Read more

TPG2022 Chapter II paragraph 2.26

As another example, assume a taxpayer sells 1000 tons of a product for $80 per ton to an associated enterprise in its MNE group, and at the same time sells 500 tons of the same product for $100 per ton to an independent enterprise. This case requires an evaluation of whether the different volumes should result in an adjustment of the transfer price. The relevant market should be researched by analysing transactions in similar products to determine typical volume discounts ... Read more

TPG2022 Chapter I paragraph 1.182

If important group synergies exist and can be attributed to deliberate concerted group actions, the benefits of such synergies should generally be shared by members of the group in proportion to their contribution to the creation of the synergy. For example, where members of the group take deliberate concerted actions to consolidate purchasing activities to take advantage of economies of scale resulting from high volume purchasing, the benefits of those large scale purchasing synergies, if any exist after an appropriate reward to the party co-ordinating the purchasing activities, should typically be shared by the members of the group in proportion to their purchase volumes ... Read more

TPG2017 Chapter III paragraph 3.28

On the other hand, internal comparables are not always more reliable and it is not the case that any transaction between a taxpayer and an independent party can be regarded as a reliable comparable for controlled transactions carried on by the same taxpayer. Internal comparables where they exist must satisfy the five comparability factors in the same way as external comparables, see paragraphs 1.33-1.118. Guidance on comparability adjustments also applies to internal comparables, see paragraphs 3.47-3.54. Assume for instance that a taxpayer manufactures a particular product, sells a significant volume thereof to its foreign associated retailer and a marginal volume of the same product to an independent party. In such a case, the difference in volumes is likely to materially affect the comparability of the two transactions. If it is not possible to make a reasonably accurate adjustment to eliminate the effects of such difference, the transaction between the taxpayer and its independent customer is unlikely to be a reliable ... Read more

TPG2017 Chapter II paragraph 2.26

As another example, assume a taxpayer sells 1000 tons of a product for $80 per ton to an associated enterprise in its MNE group, and at the same time sells 500 tons of the same product for $100 per ton to an independent enterprise. This case requires an evaluation of whether the different volumes should result in an adjustment of the transfer price. The relevant market should be researched by analysing transactions in similar products to determine typical volume discounts ... Read more

TPG2017 Chapter I paragraph 1.162

If important group synergies exist and can be attributed to deliberate concerted group actions, the benefits of such synergies should generally be shared by members of the group in proportion to their contribution to the creation of the synergy. For example, where members of the group take deliberate concerted actions to consolidate purchasing activities to take advantage of economies of scale resulting from high volume purchasing, the benefits of those large scale purchasing synergies, if any exist after an appropriate reward to the party co-ordinating the purchasing activities, should typically be shared by the members of the group in proportion to their purchase volumes ... Read more
El Salvador vs Distribuidora Salvadorena de Petroleo S.A. DE C.V., September 2013, Supreme Court, Case No 386-2010

El Salvador vs Distribuidora Salvadorena de Petroleo S.A. DE C.V., September 2013, Supreme Court, Case No 386-2010

Distribuidora Salvadorena de Petroleo S.A. DE C.V. (DSP), is active in “the wholesale and retail marketing of oil, derivatives, gas, lubricants, additives and energy in general. Following an audit the tax authorities issued an assessment regarding sale of oil. According to the authorities the prices determined by DSP for oil sold to a related party – Nejapa Power Company L.L.C. – had not been at arm’s length. An appeal was filed by the DSP. Judgement of the Supreme Court The court set aside the assessment and decided in favour of DSP. “The method of estimated, indexed or presumptive base is constructed through the use of indications, its application becomes indispensable when the Tax Administration does not have the direct means to provide it with certain data, the failure to file returns or those filed by the taxpayers do not allow the knowledge of the data necessary for the complete estimation of the taxable bases or income, or when the taxpayers ... Read more