There 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

To determine whether the usual financial ratios provide insights into what would represent an arm's length range, any analysis of controlled healthcare distributors must account for the underlying facts surrounding the functions and expenses occurred by the distribution affiliate.

Topics: Pharmaceutical Industry Benchmarking Resale Price Method Tax Controversy TNMM/CPM

Applied properly, the Comparable Profits Method (CPM) can be a useful approach for well-defined transfer pricing issues, such as the appropriate profitability of a sales affiliate. Unfortunately, CPM is often applied mechanically without regard for economic principles and functional comparability.

Topics: Benchmarking Tax Policy State Transfer Pricing TNMM/CPM Profit Indicators

The Israel Tax Authority is questioning whether costs plus markup models Israeli R&D affiliates are at arm's length. This could present issues for multinationals that have not been giving proper consideration to cost base, asset intensity and ownership of valuable intangibles in their benchmarking.

Topics: DEMPE Base Erosion and Profit Shifting (BEPS) Benchmarking Intangibles Tax Policy