Global: 'Sixth method' raises transfer pricing concerns in developing countries

Tax Insights ()

Application of a so-called 'sixth method' for determining transfer prices of commodities presents practical concerns because the method does not consider critical drivers in the determination of an arm's length price or reference. The method first was implemented in Argentina and now has been adopted by a number of developing countries — primarily in Latin America but extending beyond to India — with expansion of the method expected to continue. Companies should consider whether they might be required to adopt the sixth method in countries in which they operate and how such a requirement could affect their worldwide tax liability.