The Service
Benchmark studies priced against the right comparable set. Functional analysis, comparability adjustments, and statistical defence designed for audit and beyond.
The Service
What is an Economic Analysis in transfer pricing?
An economic analysis is the quantitative defence of the arm's length price: the benchmark study, the comparability adjustments, and the statistical reasoning that supports a specific point within the interquartile range. It is the part of the file most likely to be challenged in audit.
Most controversies turn on the economic analysis. A TNMM benchmark with eighty-five comparables and a wide IQR is fragile under cross-examination; one with eighteen tightly defensible comparables and explicit rejection criteria is robust. PETRUZZI Advisory builds the latter.
The Difference
Why retain an independent advisor for Economic Analyses?
The Answer
Big Four benchmarks default to large-N searches against fixed pan-European databases. That maximises coverage but minimises defensibility. PETRUZZI Advisory selects to the structure and the transaction, with each rejection criterion documented. The benchmark stands up in MAP or arbitration; the IQR placement is reasoned.
When it Fits
When should you retain Economic Analyses?
Common triggers.
Before filing a Local File where the underlying TNMM benchmark needs to be rebuilt or refreshed.
Before an APA submission where the benchmark will be the basis for the agreed price band.
Before MAP or arbitration where the benchmark will be tested on both sides of the border.
Royalty-rate analysis for an intangible licensing arrangement under Chapter VI.
Profit-split modelling where TNMM does not produce a defensible result on either side.
The Methodology
How does PETRUZZI Advisory deliver Economic Analyses?
Comparability is built up from the structure, not down from a database.
Step 01
Transaction characterisation
The transaction is characterised under the relevant OECD chapter. Functional profile, asset profile, risk profile, and contractual terms are documented before any database search.
Step 02
Method selection
The method is selected on technical grounds, not by default. CUP, RPM, or CP leads where comparability supports it; TNMM applies where it must; profit splits are reserved for cases where one-sided methods do not deliver.
Step 03
Comparable search
The search strategy is documented before execution. Rejection criteria are pre-set; sample-size targets are stated; remoteness review precedes statistical analysis.
Step 04
Comparability adjustments
Adjustments for working-capital differences, accounting differences, and other comparability factors are documented and defended.
Step 05
Statistical defence
The IQR placement is reasoned: arm's length point, median, or weighted within the range. The reasoning is set out in the report.
The Engagement
How an engagement runs.
Inquiry
A short conversation to understand what's on the file: the structure, the timeline, the existing advisors.
Scoping
A written scope and fee letter. Concrete deliverables, dates, and the answer to who reviews what.
Analysis
Substantive work delivered by Dr. Petruzzi personally. OECD-paragraph rigor; named cases; citeable conclusions.
Recommendation
A written opinion or report. Sets out the framework, the facts, the application, and the residual risk.
Implementation Support
Implementation, follow-up, and ongoing access as the matter develops. The engagement doesn't end at delivery.
Key Takeaways
The essentials, in their own words.
- 01
TNMM benchmarks, royalty-rate studies, profit-split modelling. Comparable selection prioritises quality over breadth.
- 02
Comparability adjustments are documented and defended, not left implicit.
- 03
Statistical defence covers interquartile range placement, sample-size justification, and remoteness review.
- 04
Each study is drafted as a stand-alone defensible document, citable in audit, MAP, and litigation.
Related Expertise
Where this connects.
Methodology, comparability, and the OECD framework, applied to the way goods are priced within a group.
Beyond the 5% mark-up. Where low value-adding rules apply, and where they don't.
Identification, attribution, valuation, and dispute defence through the DEMPE framework.
FAQ