Benchmarking
lf the amount local subsidiary charge to parent in cost plus revenue model is reasonable for transfer pricing, it is ok. ISA (Internal service Agreement) is for transfer pricing purpose. It means that the purpose is eventually to check Internal group transaction price. Therefore, it is used for one of the way to prove that the percentage is reasonable one compared to other comparable companies’ operating income margin in arm’s-length transaction in same market. If the percentage should be kept at reasonable, it might be ok
Acceptable methods by the OECD
Traditional transaction methods
1 the comparable uncontrolled price method
2 the resale price method
3 the cost plus method
Transactional profit methods
1 the transactional profit split method
2 the transactional net margin method
