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HMRC internal manual

International Manual

HM Revenue & Customs
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Transfer pricing: Methodologies: OECD Guidelines: Comparability

Importance of comparability

Central to the application of the arm’s length principle in transfer pricing is the concept of comparability. Both Article 9 of the OECD Model Tax Convention and TIOPA10/Part 4 are predicated on a comparison of the conditions in a controlled transaction with the conditions in transactions between independent enterprises.


Whatever methodology is employed to establish an arm’s length price, it will involve identification of uncontrolled transactions which have an acceptable degree of comparability with the transactions being tested with regard to both the terms and conditions of the transactions and the economically relevant circumstances under which they occur (see INTM485021). Comparability is therefore of critical importance.


There is discussion of comparability in paragraphs 1.33 to 1.118 of the OECD Transfer Pricing Guidelines and the subject is considered in greater depth from INTM485020 onwards.