Should Depreciation Be Marked Up in a Transactional Net Margin Method Context for Service Providers?

International Transfer Pricing Journal, January/February 2008

5 Pages Posted: 25 Jan 2008

See all articles by Jamal Hejazi

Jamal Hejazi

Gowling Lafleur Henderson LLP - Transfer Pricing and Competent Authority

Abstract

This article analyses the position that theoretically, although not in practice, the inclusion or exclusion of depreciation in a cost base should not alter the markup in the context of the transactional net margin method. The two key reasons why depreciation should be excluded from the analysis are considered, namely because comparables often exhibit capital intensity considerably different to the tested party and there is an inherent arbitrariness in selecting the depreciation method, thereby making the depreciating figure unreliable.

Keywords: transfer pricing, cost base, depreciation

JEL Classification: L00

Suggested Citation

Hejazi, Jamal, Should Depreciation Be Marked Up in a Transactional Net Margin Method Context for Service Providers?. International Transfer Pricing Journal, January/February 2008, Available at SSRN: https://ssrn.com/abstract=1087137

Jamal Hejazi (Contact Author)

Gowling Lafleur Henderson LLP - Transfer Pricing and Competent Authority ( email )

180 Elgin Street
Ottawa, Ontario K1P 1C3
Canada

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