INTM463020 - Transfer Pricing: OECD and methodologies: Comparability

Central to the application of the arm’s length principle in transfer pricing is the concept of comparability. Both Article 9 of the OECD Model Tax Convention and TIOPA10/Part 4 are predicated on a comparison of the conditions in a controlled transaction with the conditions in transactions between independent enterprises.

Whatever methodology is employed to establish an arm’s length price, it will involve identification of uncontrolled transactions which have an acceptable degree of comparability with the transactions being tested. Comparability is therefore of critical importance.

There is a general discussion of comparability in paragraphs 1.33 (1.15) to 1.63 (1.35) of the OECD Guidelines and the subject is considered in greater depth from INTM467080 onwards.