Benchmarking is the foundation for proving arm’s length compliance in transfer pricing. Without accurate and defensible benchmarking, businesses risk adjustments and penalties during audits.

Key Points:

1. What is Benchmarking?

   • Benchmarking compares intercompany transactions to third-party data to ensure they align with the arm’s length principle.

2. Steps to Effective Benchmarking:

   • Define the scope and search strategy.
   • Select reliable comparables from industry-specific databases.
   • Adjust for economic and geographical differences.

3. Benefits of Robust Benchmarking:

   • Defensible pricing policies that withstand audit scrutiny.
   • Transparent documentation for tax authorities.
   • Risk mitigation through proactive compliance.

Accurate benchmarking ensures your transfer pricing policies meet global standards and protect against adjustments.