Examining the Alternative Approaches to Comparability Analysis in Transfer Pricing

Comparability analysis provides evidence of compliance with transfer pricing regulations to show that intercompany transactions are conducted at arm’s length prices as is required in most jurisdictions. The concept of comparability in transfer pricing is a multidimensional concept, with product and functional comparability as two of the commonly discussed dimensions. This paper introduces a third dimension to comparability in transfer pricing, that of market comparability. In addition, the concept of comparability as a whole including the interaction between product, functional, and market comparability was examined.