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International - Economic Adjustment: Capacity Utilization Adjustment

Country:
India,International
Author:
Sunny Bilaney
Issue:
International Transfer Pricing Journal, 2015 (Volume 22), No 2
Published:
19 February 2015
This article discusses how a difference in the level of capacity utilization impacts the profit margin and when taxpayers should consider making capacity utilization adjustment in their transfer pricing analysis. As there is no authoritative guidance available on this subject, the author looks into various practical approaches that could be used by taxpayers to calculate a capacity utilization adjustment. Finally, the article provides tips for documenting such adjustment in a transfer pricing study report.
 
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