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Guide · Methods · 8 min
Selecting a transfer pricing method
A disciplined route from accurately delineated transaction to CUP, cost plus, RPM, TNMM or profit split.
01
Method selection follows the facts
Method selection starts after the transaction is delineated. The analysis should explain what each party contributes, which risks it controls and what reliable internal or external data is available.
02
Decision questions
- Is a sufficiently comparable uncontrolled price available?
- Can gross margins be measured consistently across the tested transactions?
- Is one party performing routine activities that can be tested reliably?
- Do multiple parties make unique and valuable contributions?
- Which method requires the fewest material assumptions and adjustments?
03
Document alternatives
The Local File should record relevant alternatives and why they were not selected. A conclusion is easier to review when the decision path is visible.