Transfer Pricing international tax law Transactional net margin method cs notes

Posted on 26-03-2016        By ADMIN

Transfer Pricing international tax law  Transactional net margin method  cs notes

Transactional net margin method (TNMM)
Under this method the net margin realized by the enterprise from aninternational transaction with regard to an appropriate base, along with thisnet profit margin from an uncontrolled transaction is identified. Thedifferences between the two are adjusted with respect to the changes in theopen market. The net profit so established is used to establish the Arm’slength price.

· Resale Price Method
This method reduces relevant gross profit mark-up from the sale price chargedto free entity to reach the arm’s length price, primarily used when vendor addslittle value to goods owned from associated enterprises.

· Profit split method
Three steps under this method that are applied in order to reach the ALP:
1. Net profit of the AE is computed
2. Compute relative contribution made by each of the AE to the earning of thecombined Net Profit.
3. Split the combined net profit in proportion to their contributions.

This method is applied in cases where the international transactions are sointer related that they cannot be evaluated separately.

Transfer Pricing international tax law  Transactional net margin method  cs notes

Comment :