Examples Of Comparability Analysis

4.4 Comparability analysis

Uganda’s transfer pricing guidelines provide the following comparability factors in determining whether two or more comparable transactions are related. These are to be considered to the extent that they are economically relevant to the facts and circumstances of the transactions being considered as they may lead to adjustments in both the actual and the independent price. The comparability factors include characteristics of the property or services transferred, the functions performed, contractual terms, the economic circumstances of the parties and the business strategies pursued by the parties. (URA 1997)

In order for comparables to be useful the economically relevant characteristics of the situations being compared

(OECD 2010) The comparability analysis has to consider both the perspective of the transferor and that of the transferee. Due consideration should be given to the fact that in most cases the transferee has to make investments and incur extra expenditures in order to utilize the asset.

A good functional analysis considers the economics of a the particular business and its markets, highlight the distinctiveness of the goods or services produced, recognize invisible factors not evident in the accounts and identify the relative level of risk carried out by the various group members. (Angharad Miller 2014). Some of these tasks are clearly difficult for example identifying the level of risk carried out by the various group members is difficult at URA because of limited information and expertise.

During comparability analysis it is important to include expected benefits from intangible property especially those that are transferred before they are fully developed. Other factors like limitation to the geographic area, export restriction should also be

(UN, et al. 2012). URA is making efforts to ensure that staff in the international tax unit are well trained. Many of the staff have undergone short courses on transfer pricing. They have also gone for benchmarking visits to countries with more advanced transfer pricing regimes like South Africa and Kenya. However there is still a placement challenge where some of the skilled staff are deployed in areas where they are underutilized. This problem is exacerbated by the differences in information and expertise between Multinationals and revenue administrations. MNEs have resources to employ and retain skilled staff that are supported by consultancy firms as well. This is not the case with revenue administrations, which are underfunded and