Benchmarking studies are an essential part of both tax planning intra-group transactions and management of tax disputes. But such a study will also be very useful for independent companies. Preparing a benchmarking study has benefits on multiple levels. The most important are presented below.

1. Legal requirements

As required by the existing laws, benchmarking studies are part of a transfer pricing documentation file. Failure to prepare and submit such documentation or submitting an incomplete documentation (e.g. without benchmarking studies) could result in fines, transfer pricing adjustment and late payment penalties.

2. Tax protection

Beyond its mandatory nature, a benchmarking study is a document that can be used to sustain the taxpayer’s position in front of the tax authorities. Basically, you have the opportunity to present to the tax authorities a set of independent party results / prices that are most comparable to your case. This way you avoid the situations when the tax authorities prepare simplified versions of these studies for you that may not take into account your business specifics.

3. Positive impact on business

Benchmarking studies also help you find out which are the prices / profitability in your segment of activity. Thereby, you can use this information in defining your strategic plans or you can keep a close eye on how your competitors are doing.

It is recommended to prepare a benchmarking study annually, not only when tax authorities put pressure on you!

We all know that it’s better to be safe than sorry!