Blog

The EdgarStat Blog explores issues in transfer pricing and application of the transactional net margin method (TNMM or CPM in the US) and other enterprise profit-based methods.

Abuse of the Resale Price Method for a LATAM Petroleum Distributor
February 24, 2021 by Harold McClure

Selecting alleged comparable companies with different functions than the tested party is known to open Pandora's Box in transfer pricing controversy, and is often exacerbated by a failure to adjust for material differences between the tested party and the selected comparables.

Topics: tax controversy Comparability Limited Risk Distributor Profit Indicators

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Tutorial: Using Regression Analysis to Adjust Profit Indicators
February 19, 2021 by Ednaldo Silva

Ad hoc adjustments are a risky endeavor in transfer pricing. Using regression analysis, we can test if asset intensity is relevant to explain the behavior of the operating profit markup or profit margin and calculate a reliable adjustment to the profit indicator.

Topics: TNMM/CPM Asset Intensity Adjustment Profit Indicators Tutorial

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Tutorial: Using Regression Analysis in TNMM Transfer Pricing
February 16, 2021 by Ednaldo Silva

The prevalent use of quartiles to determine profit indicators often results in a wide (unreliable range) and ad hoc assets adjustments. These problems can be solved by using regression analysis, which produces more defensible statistical ranges of the profit indicator resistant to audit scrutiny.

Topics: TNMM/CPM Profit Indicators Tutorial

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Comparability Issues in Benchmarking Hi-Tech Distribution Affiliates
February 10, 2021 by Harold McClure

Following its neighbor Australia, New Zealand has issued a large assessment to Oracle related to its distribution affiliate. We explore potential comparability and BEPS issues that could play a role in the dispute.

Topics: TNMM/CPM Comparability Profit Indicators Base Erosion and Profit Shifting (BEPS)

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Transfer Pricing Aspects of Taxing the Pharmaceutical Sector
January 26, 2021 by Harold McClure

Changes to tax laws are often seen as the primary solution to curb profit shifting. However, proper application of the arm's length principle alongside BEPS CbCR disclosures already offer powerful tools in this endeavor.

Topics: TNMM/CPM Pharmaceutical Industry Tax Policy Base Erosion and Profit Shifting (BEPS)

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Comparability Issues Are a Slippery Slope in Transfer Pricing
December 15, 2020 by Harold McClure

Comparability is a key issue in transfer pricing that is often not fully appreciated. However, comparability issues are hardly uncommon in transfer pricing controversies and can create a trickle-down effect that leads to major taxation issues.

Topics: TNMM/CPM Comparability Limited Risk Distributor Profit Indicators

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