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TNMM Segmentation Limits Transfer-Pricing Adjustments to Associated-Enterprise Transactions and Requires Turnover-Based Comparable Selection for IT Services
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TNMM benchmarking of IT services may segment associated-enterprise and non-associated-enterprise transactions where different risk profiles make a blended margin distort the international transaction margin. Transfer-pricing adjustments should be confined to associated-enterprise transactions rather than entity-level results that include domestic or non-associated-enterprise dealings. Comparable selection for IT services should apply an upper turnover filter because turnover affects assets, risks and operating margins. Interest disallowance is unwarranted where own funds exceed investments. Indirect expenditure calculations should include only investments yielding exempt income, excluding investments incapable of generating it.
TNMM benchmarking of IT services may segment associated-enterprise and non-associated-enterprise transactions where different risk profiles make a blended margin distort the international transaction margin. Transfer-pricing adjustments should be confined to associated-enterprise transactions rather than entity-level results that include domestic or non-associated-enterprise dealings. Comparable selection for IT services should apply an upper turnover filter because turnover affects assets, risks and operating margins. Interest disallowance is unwarranted where own funds exceed investments. Indirect expenditure calculations should include only investments yielding exempt income, excluding investments incapable of generating it.
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