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. Blog writings reflect the position of the authors and are not the opinion of EdgarStat.
Panama’s Administrative Tax Court ruled in favor of the tax authority Dirección General de Ingresos (DGI) in a January 19, 2023 decision involving remuneration for a related-party wholesale distributor of electronics determined using Transactional Net Margin Method (TMMM; CPM in the US). In earlier discussions, we noted how DGI benchmarked the return for a limited-function wholesale distributor of petroleum and the return for a high-function distributor of pharmaceuticals.
Topics: Limited Risk Distributor Asset Intensity Adjustment TNMM/CPM
Read moreThere are often legitimate concerns with using book value versus market value of assets in applying a Return on Assets approach in transfer pricing. While employing a Return on Costs approach may be a reliable alternative, it must also account for comparability differences in asset intensity.
Topics: Financial Economics Benchmarking CAPM Asset Intensity Adjustment Return on Assets Contract Manufacturer
Read moreDr. Ednaldo Silva illustrates why asset intensity adjustments to the Return on Assets profit indicator are redundant and unviable.
Topics: Asset Intensity Adjustment Return on Assets Profit Indicators
Read moreAd 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: Tutorial Asset Intensity Adjustment TNMM/CPM Profit Indicators
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