There will be explanations on the transactional net margin method
The Ministry of Finance has started consultations on the draft explanations on transfer pricing. This is the fifth clarification in this area. This time, they will cover the transactional net margin method (TNMM). The draft explanations run to 22 pages.
– The draft explanations have been divided into five parts. The individual parts concern respectively: application of the MMTN, criteria of comparability, difficulties in applying this method, comparison with other methods and finally its practical application – lists Cyprian Werykowski, tax advisor, director at Thedy & Partners.
The explanations are to be applied to controlled transactions carried out after 31 December 2018.
– TNMM consists in determining a financial ratio reflecting the ratio of the net profit margin that the audited entity obtains in a controlled transaction to the relevant base. The application of the net transaction margin method allows verifying whether the level of “net profit margin” achieved by an entity in a controlled transaction has been determined at the market level. In the net transactional net margin method, the comparison may be made, as a rule, with the whole activity of an unrelated entity – emphasises Cyprian Werykowski.
Consultations on the draft clarifications will last until the end of August 2021.
If you already have questions regarding the application of the MMTN or other areas of transfer pricing, please contact: cyprian.werykowski@thedy.pl