Glossary

Benchmarking Analysis
Identifies comparable transactions and companies for transfer pricing purposes.

Comparable Uncontrolled Price Method (CUP)
Widely used TP method which identifies comparable transactions & companies for transfer pricing purposes.

Documentation
Required records proving transfer pricing compliances with relevant laws.

Economic Analysis
Evaluates transaction conditions affecting inter-company pricing.

Functional Analysis
Examines functions, assets and risks of entities in transactions.

Global Formulatory Apportionment
Profits divided among jurisdictions using a predetermined formula. Alternative to the Arm's length price (ALP).

Horizontal Monitoring
Ongoing transparency and cooperation with tax authorities.

Intangibles
Non-physical assets like patents, copyrights and brand names.

Jurisdiction
Territory with specific tax regulations impacting transfer pricing.

Key Value Drivers
Critical elements influencing a group's profitability.

Local file
Specific transfer pricing documentation for local jurisdiction i.e., country in which the company has been incorporated.

Master File
Provides a global overview of the group operations. Mostly maintained by the ultimate holding company of the group.

Non Routine Returns
Returns surpassing normal levels, often due to unique intangibles.

Operating Margins
Ratio showing profitability before interest and taxes.

Profit Split Method
A TP method which allocates profit which reflects each participant's economic contribution.

Quality of Goods/Services
Can impact transfer prices due to differences in quality. One of five OECD comparability factors.

Resale Price Method
A TP method that determines price based on the resale price to third parties.

Safe Harbor
Predetermined transfer pricing methods that reduce compliances.

Transactional Net Margin Method (TNMM)
Another widely used TP method which compares net profits relative to an appropriate base.

Uncontrolled Transactions
Transactions between independent entities under normal market conditions.

Value Chain Analysis
Reviews sequence of activities a business undertakes and how they contribute to the value created.

Working Capital Adjustment
Accounts for differences in working capital in comparables.

External Benchmarking
Comparing company data with that of external firms/transactions.

Year-end Adjustments
Adjustments made to align transfer pricing with arm's length range.

Zero tax jurisdictions
Countries imposing little or nil corporate tax.