Topic collection
Pricing methods
There is no ranking of methods in isolation — there is a most appropriate method for a given transaction, given the functional analysis and the reliability of available comparables.
Comparability analysis
8 minThe process of finding uncontrolled transactions or companies similar enough to test whether a controlled outcome is arm's length.
Most appropriate method
6 minThe requirement to choose the transfer pricing method best suited to the facts, rather than following a fixed hierarchy.
Comparable uncontrolled price (CUP) method
5 minA method that compares the price charged in a controlled transaction with the price in a comparable uncontrolled transaction.
Transactional net margin method (TNMM)
7 minA method that tests the net profit margin a party earns from a controlled transaction against margins earned by independent companies.
Transactional profit split method
6 minA method that divides the combined profit from a controlled transaction between the parties on an economically valid basis.
Arm's length range
4 minA range of figures produced by applying a method to multiple comparable data points, any of which may be arm's length.
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