Page 53 - Strategic Tax Planning for Global Commerce & Investment

Strategic Tax Planning for Global Commerce and Investment

 Economists
 Engineers

 Financial analysts, etc.

General Principles and Guidelines to Transfer Pricing

The general principles and guidelines, applied uniformly by
most jurisdictions, require the enterprise first, to undertake a
substantive analysis of its transactions and then select its transfer
pricing methods. The chronology of the process is important.
Furthermore, the enterprise must preserve its substantive
analysis through contemporaneous written documentation in
order to avoid penalties imposed by the various tax jurisdictions.
Three components of substantive analysis are mandatory:

1. The enterprise must use the best transfer
pricing method
2. The enterprise must undertake a trough

comparability analysis
3. The enterprise must use the arms’-length
range to determine the transfer price (mar-
ket price).
TANSFER PRICING ANALYSIS

Comparabilty Best
analysis method

rule

Arm’s length

Price range

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