Where treating costs as pass-through costs is found to be arm’s length, a second question arises as to the consequences on comparability and on the determination of the arm’s length range. Because it is necessary to compare like with like, if pass-through costs are excluded from the denominator of the taxpayer’s net profit indicator, comparable costs should also be excluded from the denominator of the comparable net profit indicator. Comparability issues may arise in practice where limited information is available on the breakdown of the costs of the comparables.
TPG2022 Chapter II paragraph 2.100
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By OECD
Category: OECD Transfer Pricing Guidelines (2022), TPG 2022 Chapter II: Transfer Pricing Methods | Tag: Key is to compare like with like, Net Profit Indicator/Profit Level Indicator (PLI), Pass through costs, Transactional net margin method (TNMM), Transactional profit methods, Transfer pricing methods
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Supplemental Guidance
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