Introduction

While the arm’s length principle is globally accepted, benchmarking approaches differ significantly across countries. This blog explores those key differences and best practices globally.

Key Global Differences

• Acceptance of multiple year data (common in the US, not in India)

• Use of global vs. regional comparables

• Tax authority databases vs. commercial ones (e.g., Orbis, RoyaltyStat, ktMINE)

• Local file requirements in EU vs. more flexible approaches in ASEAN

Country Snapshots

• USA: CUP method focus, use of internal comparables, reliance on IRS regulations

• UK: Flexible but OECD-aligned; HMRC encourages early discussions on methodology

• Australia: Rigorous analysis of DEMPE functions and value chain

• Singapore/Malaysia: More lenient on local comparable availability, but stricter on related-party disclosures

Challenges in Cross-Border Benchmarking

• Currency adjustments

• Geographic market differences

• Differences in economic cycles

• Language and financial reporting format barriers

Conclusion

Global benchmarking requires adapting to local expectations while ensuring consistency with group policies. Multinationals must tailor their approach to each jurisdiction while maintaining an overarching arm’s length policy.