Benchmarking study — how much of this can I do myself?
Some of it, yes — and we will say so on the call if that is the honest answer. The parts that are worth paying for are the ones where a missed election, a missed deadline or an unverified threshold costs more than the fee: the study defines the tested party, screens a database for candidates, applies quantitative and qualitative filters, and computes a range.
What if I have already filed and got it wrong?
That is a common starting point. We re-derive the position, identify whether an amendment or a disclosure route is the right vehicle, and tell you which one preserves the relief that is still available. The order matters more than the speed.
How long will it take?
It depends on the documents rather than on us. Once the pack is complete most filings turn around inside a fortnight; anything that needs a certificate from a tax authority runs on that authority's timetable, which we tell you at the start rather than at the end.
Why does the auditor ask why we rejected comparables?
Because the rejections are where judgement was exercised. Anyone can run a database screen, and the result of the screen is not the study. What makes a range defensible is the record of which candidates were taken out by hand and on what ground: the company was not independent, the segment was wrong, the accounts were not comparable, the activity described on its own website did not match. A study that presents a final set without that record leaves the reviewer to assume the set was chosen to produce a convenient answer. The rejection log is the first thing challenged in an examination, the cheapest part of the study to get right at the time, and the hardest to reconstruct afterwards.
How do we decide which entity is the tested party?
The tested party is normally the side of the transaction with the less complex functional profile, the one that does not own the valuable intangibles and does not bear the entrepreneurial risk, because its return is the one that can be compared with independent companies doing something similar. Choosing the wrong side is a common and expensive error: benchmarking the entity that owns the brand against routine distributors produces a range that means nothing. The choice comes out of the functional analysis rather than out of convenience, and the reason for it belongs in the study. Where both sides are complex, a one-sided method may not be the right method at all.
Is a benchmarking study from a few years ago still valid?
It depends on what has changed. A study has two moving parts: the set of comparable companies, and their financial results. If the business is unchanged, with the same functions, risks and markets, the accepted set may still stand and what needs refreshing is the financial data underlying the range. If the business has changed, the search itself has to be redone, because the screen was built around a functional profile that no longer describes the tested party. Either way, a study sitting on file with no note of when it was last reviewed invites the question. We record what was refreshed, what was kept and why, each time we touch one.
Can we use foreign comparables where local ones are scarce?
Often yes, but it has to be argued rather than assumed. Widening the geography is a legitimate response to a thin local market, and in smaller economies it is unavoidable. What the study then has to address is whether the wider market is economically comparable, with similar competitive conditions, cost structures and customers, and whether any adjustment is needed to bridge the difference. A reviewer's objection is rarely that a foreign set was used. It is that the widening happened silently, with no statement of why the local screen was insufficient. Record the local search, record what it produced, and record the decision to widen.
What is the difference between quantitative and qualitative filters?
Quantitative filters are applied mechanically to the database: independence criteria, activity codes, turnover bands, persistent losses, missing financial data. They narrow a very large population to a reviewable one. Qualitative filtering is the manual pass that follows, reading what each remaining company actually does, from its accounts, its website and its segment disclosures, and deciding whether it is genuinely comparable to the tested party. The quantitative pass is reproducible and the qualitative pass is judgement, which is precisely why the qualitative rejections need their reasons recorded. A study that documents only the screen has documented the easy half.
Our margin falls outside the range, what happens next?
First, check that the range is right. The tested party, the screen, the rejections and the financial data all have to be sound before the comparison means anything. Where the range stands and the tested party's result sits outside it, an adjustment bringing the result to an appropriate point in the range is the usual outcome, and it is better made in the return than found in an examination. The more useful question is why the result fell outside. A one-off cost, a start-up phase or an unused capacity problem may be a real difference between the tested party and the comparables, and if so it belongs in the analysis rather than being absorbed silently by an adjustment.
What is the difference between a master file and a local file?
The master file describes the group as a whole — its structure, where value is created, how intangibles and financing are held. The local file covers one entity's own related-party transactions in detail, with the analysis supporting each price. Larger groups file both, plus country-by-country reporting above a size threshold, and the thresholds differ by country. See master file vs local file.
What is an intercompany agreement, and do we need one?
It is the contract between the related parties — who does what, who bears which risk, what is charged and on what basis. It matters because when there is no agreement, an auditor prices the transaction from the conduct they can observe rather than from the arrangement you intended, and conduct rarely tells the whole story. Signed agreements that match the invoices and the actual functions are the cheapest transfer pricing protection there is. See our transfer pricing work.
