Part 1 - AL-Tax

International Taxation HandbookDecreasing identifiabilityand comparability offunctions, risk, assetsIncrease in economicintegration of functionsMethods:CUPCUTC +R −TNMMRPSCPMPSFAName:ComparableuncontrolledpriceComparableuncontrolledtransactionCost plusResaleminusTransactionalnetmarginmethodResidualprofit splitComparableprofitmethodProfit splitFormularyapportionmentComparesPrice oftangiblePrice ofintangible(gross)margin pertransactionGrossmargin pertransactionNet marginpertransactionP/L +transactionalmarginsOperatingprofitmarginOperatingprofit orloss ofdivisionNo comp.GermanyTz. 2.2.2VwG 1983Vgl.Par. 2.2.2.Tz. 2.2.4.VwG 1983Tz. 2.2.3.VwG 1983Tz.3.4.10.3VwG 2005Tz.3.4.10.3.c Tz.3.4.10.3.dVwG 2005 VwG 2005------OECDGuidelinesII-2II-2II-5II-11III-9III-2(III-2)III-2III-19Ref. inUS-Regs§1.482-3(b)§1.482-4(c)§1.482-3(d)§1.482-3(c)§1.482-3(e)§1.482-6§1.482-5§1.482-6---Figure 7.5Transfer pricing methods and reference to selected national provisionsparties. Hence, the price for a transaction or, more likely, the profit margin (or anindicator for profitability) of the tested party and the third party can be comparedby means of database-driven margin analysis (cf. Brem and Tucha, 2006a).Transaction-based methods are often called standard methods. While manytax jurisdictions exclusively accept transaction-based methods, others indicatemerely a preference allowing also for other methods.7.5.2 ‘Hybrids’, budget planning, and budget-actual assessmentGiven the company type classification, hybrid units (as in Paragraph 3.4.10.2c)may come under two categories: (a) Hybrids with a high level of uncertainty, yetlow degree of uniqueness (comparability) and hence high level of uncertainty;(b) Hybrids with a high level of determinable risk and low degree of uniqueness. 9To compile an appropriate arm’s length analysis for documentation purposesin jurisdictions such as Germany, it is essential to note that the transactional netmargin method is no longer deemed applicable to tested parties with hybrid164