Comparability factors
When you delineate the controlled transaction, you base your analysis on economically relevant circumstances. The OECD Transfer Pricing Guidelines refer to the economically relevant circumstances of a transaction as comparability factors.
You can identify the economically relevant circumstances by analysing the five comparability factors:
- Contractual terms
- How functions are performed, which assets are utilised, and the risks associated with the transaction, FAR analysis
- Characteristics of the assets/services being transferred
- Economic circumstances related to the parties and the markets
- Business strategies
These factors form the basis for the comparison you must make against uncontrolled comparable transactions. For further information, see the section Identifying comparable transactions, explaining and documenting the basis for comparison.