* "Questionable adjustments" were made to the TNMM
to achieve the nine to twelve percent markup, which had the effect of lowering the resulting corporate income tax basis in the Netherlands.
Most member nations have expressly or implicitly adopted the TNMM
or some variation thereof in their tax systems.
The main difference between Scenario 3 and Scenario 5 is that a comparable uncontrolled price is more likely to be found in Scenario 5 than in Scenario 3; this should lead to the application of a resale method or the TNMM
to Scenario 3.
is substantially equivalent to the CPM under the Sec.
Normally the transfer pricing on goods sold by the distributor should already include local marketing intangibles in the distribution margin (the TNMM
of the Discussion Draft raises the bar for use of the TNMM
As a result, although the transactional comparable uncontrolled price (CUP) method is preferred where the comparability of the transaction is clear, the revised guidelines afford greater flexibility to use the cost-plus or a profits-based method, including the transactional net margin method (TNMM
) and profit-split methods.
The 1995 guidelines require taxpayers to use a comparable uncontrolled price (CUP) method or the resale price or cost plus methods before applying a transactional net margin method (TNMM
) or other profit split method.