{"id":7137,"date":"2017-10-04T20:49:03","date_gmt":"2017-10-04T18:49:03","guid":{"rendered":"https:\/\/altax.al\/case-of-use-of-methods-consistent-with-the-comparable-uncontrolled-price-method\/"},"modified":"2021-11-24T07:57:29","modified_gmt":"2021-11-24T06:57:29","slug":"case-of-use-of-methods-consistent-with-the-comparable-uncontrolled-price-method","status":"publish","type":"post","link":"https:\/\/altax.al\/en\/case-of-use-of-methods-consistent-with-the-comparable-uncontrolled-price-method\/","title":{"rendered":"Case of use of methods consistent with the comparable uncontrolled price method"},"content":{"rendered":"<div class=\"wpb-content-wrapper\"><p>[vc_row][vc_column][vc_column_text]<em>Summary of business of corporation and foreign-related person<\/em><br \/>\nChina\u00a0corporation P is a manufacturer and distributor of product A, and 10 years previously it\u00a0established company S in Albania\u00a0as a subsidiary to supply raw material for product A.<\/p>\n<p><em>Summary of foreign-related transaction<\/em><\/p>\n<p>Company S sells its entire output of raw material a to company P, and company P manufactures product A from this for sale to third-party agents in China.<\/p>\n<p><em>Functions and activities of corporation and foreign-related person<\/em><\/p>\n<p>Company P receives no supplies of raw material a from any source except company S.<\/p>\n<p><em>State of market and other factors<\/em><\/p>\n<p>Raw material a for product A is sold worldwide on the commodities exchanges, and it has a\u00a0quoted market price on these exchanges.<\/p>\n<p><strong>Treatment for transfer pricing taxation purposes<\/strong><\/p>\n<p><em>Consideration of applicability of traditional transaction methods<\/em><\/p>\n<p>As precedence is given to application of the traditional transaction methods when selecting the method of calculation of the arm\u2019s length price under the provisions of Article 36\/2 of the Income Tax Law in Albania, an examination of comparable transactions and other relevant provisions produced the following findings:<\/p>\n<ul>\n<li>Company P receives no supplies of raw material a except from company S, in addition\u00a0to which company S supplies its entire output of raw material a to company P. It was therefore not possible to find any comparable transactions for application of the CUP\u00a0method. It was also not possible to find any comparable transactions for applying the\u00a0CUP method from publicly available information.<\/li>\n<li>As company P performed a manufacturing function in producing product A from raw\u00a0material a supplied by company S, it is also not possible to apply the RP method to<br \/>\ncompany P.<\/li>\n<li>Of the traditional transaction methods, one possible option would be to apply the CP\u00a0method to company S. However, the comparable transactions in this case would be\u00a0uncontrolled transactions in Albania. As sufficient information to adjust for differences\u00a0in the impact on the profit margin for gross profit on sales could not be\u00a0obtained, the CP method could not be applied.<\/li>\n<\/ul>\n<p><em>Selection of method of calculation to substitute for traditional transaction methods<\/em><\/p>\n<p>Based on the above, in this case it was found that the traditional transaction methods could not be applied. After considering the application of methods consistent with the traditional transaction methods prescribed in Article 36\/2 in the Income Tax Law, however, it was found that worldwide transactions on commodities exchanges and the existence of a market price for raw material a meant that a method consistent with the CUP method could be applied, after adjusting for differences in the particular transaction terms (e.g. transportation costs), to calculating the arm\u2019s length price.<\/p>\n<p><strong>Explanation<\/strong><\/p>\n<p>Regarding points to note when considering the applicability of the traditional transaction\u00a0methods (including methods equivalent to the traditional transaction methods) and judging\u00a0whether transactions corresponded to comparable transactions.<\/p>\n<p>If no transactions exist between unrelated persons that are comparable to the\u00a0foreign-related transaction and the traditional transaction methods cannot be applied, it is\u00a0possible to apply a method consistent with the traditional transaction methods where objective\u00a0and realistic indicators of variables such as market prices (e.g., the quoted market price in this\u00a0case) are available by using these transactions as the comparable transactions in order to\u00a0calculate the arm\u2019s length price.[\/vc_column_text][\/vc_column][\/vc_row]<\/p>\n<\/div>","protected":false},"excerpt":{"rendered":"<p>[vc_row][vc_column][vc_column_text]Summary of business of corporation and foreign-related person China\u00a0corporation P is a manufacturer and distributor of product A, and 10 years previously it\u00a0established company S in Albania\u00a0as a subsidiary to [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"footnotes":""},"categories":[10281],"tags":[8391],"class_list":["post-7137","post","type-post","status-publish","format-standard","hentry","category-online-education","tag-transactions"],"featured_image_src":{"landsacpe":false,"list":false,"medium":false,"full":false},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.7 - 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