TRANSFER PRICING FUNDAMENTALS #1

The most fundamental principle that transfer pricing is build on is: "comparing apples with apples." This is seems so simple - so why do we find tax policies, tax assessments and multi-million dollar disputes comparing of apples and oranges, apples and bananas, apples and pigs, and apples and cars?

Sometimes, we forget to regard the most basic ideas of what we are attempting to accomplish and we get lost in the forest of methods, tools, statutes and risk protocols. The complexity in Transfer Pricing is sometimes created by illusions created by the risky environment in which it exists and not in the true nature of the topic. Taxpayers attempting to manipulate tax positions sometimes forget that you have to stay in the boundaries of likeness; and some revenue officials wanting to milk the cash cow as dry as possible likewise forget that cars do not grow on trees.

COMPARING APPLES WITH APPLES

We should also remember that the apples should not come from the same tree. If the root of the tree is contaminated, the comparison would be fiction. To compare the quality of an apple with another apple, the one tree must be a healthy tree.

What do I mean by this? Well, is the corporate group is the tree, connected with branches and twigs, hidden behind leaves