TPG2022 Chapter IX paragraph 9.23

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For instance, where a full-fledged distributor is converted into a limited-risk distributor or commissionnaire resulting in the reduction or elimination of risks relating to inventory in the restructured enterprise, in order to determine whether such risk is economically significant the tax administration may want to analyse:

  • The role of inventory in the business model (for example, speed to market, comprehensive range),
  • The nature of the inventory (for example, spare parts, fresh flowers),
  • The level of investment in inventory,
  • The factors giving rise to inventory write-downs or obsolescence (for example, perishability, pricing pressures, speed of technical improvements, market conditions),
  • The history of write-down and stock obsolescence, and whether any commercial changes affect the reliability of historic performance as an indicator of current risk,
  • The cost of insuring against damage or loss of inventory, and
  • The history of damage or loss (if uninsured).

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