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Transfer pricing
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====Tested party and profit level indicator==== Where testing of prices occurs on other than a purely transactional basis, such as CPM or TNMM, it may be necessary to determine which of the two related parties should be tested.<ref>OECD Guidelines 3.43, 26 CFR 1.482-5(b)(2).</ref> Testing is to be done of that party testing of which will produce the most reliable results. Generally, this means that the tested party is that party with the most easily compared functions and risks. Comparing the tested party's results to those of comparable parties may require adjustments to results of the tested party or the comparables for such items as levels of inventory or receivables. Testing requires determination of what indication of profitability should be used.<ref>OECD Guidelines 3.41, 26 CFR 1.482-5(b)(4).</ref> This may be net profit on the transaction, return on assets employed, or some other measure. Reliability is generally improved for TNMM and CPM by using a range of results and multiple year data.<ref>OECD Guidelines 3.43, 3.44, 26 CFR 1.482-1(e)(2).</ref> this is based on circumstances of the relevant countries.
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