Where the most appropriate transfer pricing method in the circumstances of the case, determined following the guidance in paragraphs 2.1- 2.12, is a transactional profit split, financial information on all the parties to the transaction, domestic and foreign, is needed. Given the two-sided nature of this method, the application of a transactional profit split necessitates particularly detailed information on the foreign associated enterprise party to the transaction. This includes information on the five comparability factors in order to appropriately characterise the relationship between the parties and demonstrate the appropriateness of the transactional profit split method, as well as financial information (the determination of the relevant profits to be split and the splitting of the profits both rely on financial information pertaining to all the parties to the transaction, including the foreign associated enterprise). Accordingly, where the most appropriate transfer pricing method in the circumstances of the case is a transactional profit split, it would be reasonable to expect that taxpayers be ready to provide tax administrations with the necessary information on the foreign associated enterprise party to the transaction, including the financial data necessary to calculate the profit split. See Chapter V.
TPG2022 Chapter III paragraph 3.21
Posted on | By OECD
Category: OECD Transfer Pricing Guidelines (2022), TPG2022 Chapter III: Comparability Analysis | Tag: Comparability analysis, Detailed information on the foreign associated, Documentation Requirements, Information in foreign companies, Profit split method, Tested party
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