CRITERIA OF A BENCHMARKING STUDY OF COMPARABLE COMPANIES FOR THE IMPLEMENTATION IN THE NET PROFIT TRANSFER PRICING METHOD

Анотація

The article analyzes the statutory requirements for the criteria to select comparable companies in the framework of building the range of profitability of independent companies, which corresponds to the principle of “arm’s length”. Among the five transfer pricing methods used to analyze the compliance of controlled transactions with the principle of “arm’s length”, the net profit method is the most popular (except for credit transactions and transactions involving intangible assets, which are not discussed in this article). This is a logical result of a gradual overriding of methods depending on the availability of the necessary sources of comparable information because only the net profit method allows the application of external information on the profitability of comparable enterprises, which can be obtained from public sources – usually professional commercial databases. The main challenge in using such databases, however, is to determine the optimal approach to selecting comparable companies, and mainly to build a robust company selection strategy that simultaneously finds a network of as many comparable companies as possible and meets the requirements of the tax law. Possible databases that can be used for benchmarking research are identified, and a roadmap for the step-by-step application of the criteria for selecting comparable companies is proposed. The practical example of the application of the proposed selection criteria and recommendations on solving typical problems during the analysis, improvement of the selected quality based on the requirements of the Tax Code of Ukraine and public sources of information are given. The results of this article may be of practical value for enterprises engaged in controlled transactions and being the objects of transfer pricing in Ukraine.

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