The Commissioner-General relies on the following key factors when conducting a comparability analysis to ensure that transfer pricing arrangements adhere to the arm’s length principle:

1. Characteristics of Properties or Services:
   Differences in specific characteristics of property or services often account for differences in their value in the open market. Comparisons of these specific features might be useful in determining whether controlled transactions and uncontrolled transactions are comparable. Specific characteristics considered include quality, durability, and availability.
2. FAR Analysis (Function, Assets, and Risks):
   The Commissioner-General will examine the functions performed, assets utilized, and risks assumed by each party in the transaction. Differences in the extent of functions performed or risks assumed by each party in a controlled relationship versus an uncontrolled relationship should be considered. Functions such as research, development, and marketing may influence the pricing.
3. Contractual Terms:
   The contractual terms between related parties are examined to ensure they reflect true economic substance. Contractual terms may define the division of responsibilities, risks, and benefits. Any differences between controlled and uncontrolled terms need to be adjusted to reflect market conditions.
4. Economic Circumstances:
   The economic conditions surrounding the transaction can affect its comparability. Differences in geographic location, market size, competition, and consumer purchasing power may explain variations in pricing. Factors such as market conditions at the time of the transaction and cost of production will also be considered.
5. Market penetration:
   Multinational enterprises’ business strategies could include market penetration
   strategies. Taxpayer seeking to penetrate a market or to measure its market share
   might temporarily charge a price for the product that is lower than the same price
   charged for otherwise comparable products in the same market.
   Additionally, a taxpayer seeking to enter a new market or a taxpayer seeking to
   expand or defend its market share might temporarily incur higher cost. Such costs
   could include start-up costs or increased marketing efforts.
   As a result, such a taxpayer might achieve lower profit levels than other taxpayers
   operating in the same market or may even make losses at the market penetration
   stage