The facts are the same as in paragraph 2.42. However, the amount of the warranty expenses incurred by Distributor A proves impossible to ascertain so that it is not possible to reliably adjust the gross profit of A to make the gross profit margin properly comparable with that of B. However, if there are no other material functional differences between A and B and the net profit of A relative to its sales is known, it might be possible to apply the transactional net margin method to B by comparing the margin relative to A’s sales to net profits with the margin calculated on the same basis for B.
TPG2022 Chapter II paragraph 2.113
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By OECD
Category: OECD Transfer Pricing Guidelines (2022), TPG 2022 Chapter II: Transfer Pricing Methods | Tag: Comparability adjustments, Denominator - sales, Example - warranty, Functional differences, Net Profit Indicator/Profit Level Indicator (PLI), Transactional net margin method (TNMM), Transfer pricing methods
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