Comparability analysis in transfer pricing is one of the pivotal aspects for implementing the arm's length principles in business. It is so crucial that it has its own regulations being outlined in the Directorate General of Taxes Regulation Number PER-32/PJ/2011 (Peraturan Direktur Jenderal Pajak Nomor PER-32/PJ/2011) and the Minister of Finance Regulation Number 22 of 2020 (PMK No. 22/2020).

Given the significance of the analysis involved in transfer pricing, in the following article, the TGS AU Indonesia team will elaborate further on the implementation of transfer pricing comparability analysis for companies.

Comparable Analysis in Transfer Pricing, Why is it Important?

Before delving deeper into the core discussion, it is important to elaborate more about the urgency of comparability analysis for businesses. There are several key benefits to comparability analysis:


1. Ensuring Legal Compliance

One of the primary benefits of transfer pricing comparability analysis is ensuring a company's compliance with applicable tax regulations. By conducting proper comparability analysis, a company can ensure that the transfer prices used in inter-company transactions within their group are in line with prices that would be used in transactions between independent parties.

2. Optimizing Tax Expenditures

Through transfer pricing comparability analysis, a company can engage in tax planning to minimize tax burdens legally. Consequently, the company can avoid unnecessary tax expenses and maximize profits derived from their operational activities.

3. Risk Management

When transfer pricing analysis is done, it aids companies in managing tax-related risks such as inspections and potential tax disputes. By correctly applying transfer pricing principles, companies can reduce the probability of tax authorities disputes.

How to Implement Comparability Analysis in Transfer Pricing: Simplified Step by Step

Apart from understanding the essence of comparability analysis in implementing the Arm's Length Principle (ALP), it's crucial for companies to comprehend thow to implement transfer pricing comparability analysis in a correct way.

Based on Article 12 paragraph (3) of the Minister of Finance Regulation Number 22 of 2020 (PMK 22/2020), comparability analysis conducted in six stages.

  1. Understand the transactions characteristics that influenced by special relationships being tested based on the results of identifying the commercial and financial relationships between taxpayers and affiliates and determining the business characteristics of each transacting party.

  2. Identify the existence of independent transactions that could serve as reliable comparables.

  3. Determine the tested party for transfer pricing when using profit-based methods. The tested party is the party in a transaction influenced by special relationships with simpler functions, assets, and risks.

  4. Identify differences in conditions between the tested transaction influenced by special relationships and the selected comparables.

  5. Make appropriate adjustments to the selected comparables to eliminate the material impact of the differences in conditions on the transaction price indicator.

  6. Determe the selected independent transactions for comparison.

Challenges in Implementing Comparability Analysis

Despite its urgencies to companies and businesses, the practical implementation of comparability analysis in transfer pricing can lead into several challenges. These challenges include:

  1. Complexity: Transfer pricing itself has a rather intricate scheme, especially for multinational companies with numerous subsidiaries. This often necessitates fair value assessments, risk analysis, and an in-depth understanding of various tax regulations.

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  2. Regulatory Changes: Like other tax regulations, transfer pricing rules can change. If the regulations evolve, companies must be prepared to adapt and modify their interrelated transfer pricing schemes accordingly.

Pro Tip: Things to Consider in Conducting Transfer Pricing Comparability Analysis

To ensure a company's comparability analysis runs smoothly, taxpayers should pay attention to specific matters, particularly on aspects that related to data used in transaction comparisons.

  1. Ensure that transactions between the taxpayer and related parties are considered comparable to transactions between unrelated parties concerning: 
  2. The absence of material or significant differences affecting the price or profit of the compared transactions; or
  3. Where differences exist, make adjustments to eliminate the material or significant effects of those differences on the price or profit.
  4. If both internal and external comparables with the same level of comparability are available, taxpayers must use internal comparables for determining the fair price or fair profit.
  5. In cases where internal comparables data are strictly confidential, the data in question can only be used for incidental transactions between the taxpayer and related parties.


In addition to these three points, taxpayers are also obligated to document the steps, assessments, and results when conducting comparability analysis and determining comparables, using internal or external data, and retaining books, basic records, or related documents.


From the discussion above, it is evident that comparability analysis in transfer pricing is a crucial step in implementing the arm's length principle and business reality in business operations. This practice offers numerous benefits, including ensuring tax compliance, optimizing tax expenditures, and effectively managing tax-related risks.

However, it is essential to remember that for the analysis process to run smoothly, companies must pay close attention to factors related to transaction comparables and consistently document their progress. By understanding the urgency of comparability analysis and adhering to appropriate guidelines, companies can engage in transfer pricing practices that align with regulations and minimize tax-related risks.

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