Can I use the price we charge outside customers?
Where that comparison exists it is the one to start with, and it is called an internal comparable. If your company sells the same product to unrelated customers, the price it achieves there is direct evidence of what independent parties agree. The caution is that the two sales must be comparable on the things that move price: quantity, contract length, delivery and payment terms, the market the customer sits in, the stage of the product's life, and whether either sale carries services the other does not. Where those differ and the difference can be measured, the comparison can be adjusted. Where the third-party sales are occasional and the related-party flow is the bulk of the business, the comparison weakens.
Why does my adviser say no comparable price exists?
Because a direct price comparison is demanding about product similarity. Margin-based methods tolerate differences between products because they test a return on functions; a price comparison does not, since a small difference in specification, brand or bundled service can move a price substantially. So the method is realistic for goods that are close to fungible and for well-defined services, and largely unavailable for differentiated or branded products, or anything sold with support that varies by customer. The absence of a comparable price is a finding, not an oversight. It is what pushes the analysis towards testing a margin instead.
Can I use a competitor's published price list as a comparable?
Usually not on its own. A list price tells you what was asked, not what was transacted, and the discounts, rebates, volume terms and payment periods that made up the real price are exactly what you cannot see. A published quotation for a commodity traded on a recognised market is a different matter, because the terms behind the quotation are defined and the adjustments needed to reach your own circumstances can be identified. The distinction is whether you can see enough of the surrounding terms to make the figure comparable, rather than whether the source is public.
How similar does the product have to be?
Similar on every characteristic that affects the price a buyer would pay. Physical specification is the obvious one, but so are quality and reliability, availability, the presence of a brand, any warranty or support supplied with it, and whether the buyer receives exclusivity in a territory. Two items can be technically identical and still not comparable if one carries a brand the market pays for. The practical test is to ask what a buyer negotiating at arm's length would treat as different, and then ask whether that difference can be quantified from evidence.
Can differences in volume or delivery terms be adjusted for?
Some can. Where a difference is mechanical and evidenced — freight and insurance to a different delivery point, a discount schedule the seller applies to unrelated customers by volume, a payment period that can be priced from a funding cost — an adjustment improves the comparison. Where the difference goes to something less tangible, such as brand strength or a bundled service, adjustment becomes an estimate dressed as arithmetic. A long list of adjustments is a signal that the comparable is not close enough. Two or three evidenced adjustments to an otherwise close transaction is the shape this method should have.
Is a direct price comparison better than a margin method?
Where a genuinely close comparable transaction exists, yes, because it tests the actual price rather than inferring it from a return. It relies on fewer assumptions and it is easier to explain. That preference only holds while the comparable is close, though. A weak price comparison is less reliable than a well-built margin analysis, and stretching one with a series of unevidenced adjustments produces a position that looks precise and is not. Choose the method the available evidence supports, and record why the others were set aside.
What counts as foreign income, and what is a foreign tax?
Foreign income is income sourced outside the country you are filing in — where the work was done, where the property sits, where the payer is resident, depending on the type. A foreign tax, for credit purposes, is a levy imposed by another country that functions as an income tax and that you were legally required to pay. Consumption taxes, property taxes and most social contributions are not, however real the cost. Sourcing is decided by rule, not by which bank received it. See the foreign tax credit.
How would a foreign tax authority know I am resident there?
Mostly from information you or your bank already provided. Account-opening forms ask you to self-certify tax residence, and that certification is reported between authorities under the Common Reporting Standard or, for US accounts, under the FATCA framework. Beyond that: employer and payroll filings, property registries, immigration records and the tax filings of anyone who paid you. The realistic planning assumption is that the data arrives. See FATCA and information reporting.
