give example for transactional net margin method??
Answers
Answer:
Hi mate
Explanation:
The transactional net margin method (TNMM) in transfer pricing compares the net profit margin of a taxpayer arising from a non-arm's length transaction with the net profit margins realized by arm's length parties from similar transactions; and examines the net profit margin relative to an appropriate base such as costs ...
Answer:
The Transactional Net Margin Method is a transactional profit method. A transactional profit method measures the net operating profits realized from controlled transactions. It then compares the profit level to the profit level realized by independent enterprises engaging in comparable transactions.
example...
Company X provides administrative support services such as invoicing and bookkeeping. Associated enterprise Y asks X to provide invoicing services. Y thinks that they need about 1.000 hours of such services.
X knows that the total cost of 1.000 hour of services is 125.000 USD. X wonders what transfer price it has to charge. This means that X should find the terms and conditions (here: the price) of a comparable transaction.
There are many companies around that provide comparable services, including independent Enterprise B. X and B have exactly the same business model. Company X can look at Enterprise B to determine a good arm’s length price.