Currently, one of my top blog posts is IQR – Exclusive or Inclusive, that is the question. During my hiatus I did not respond to the comments raised in the post (sorry) but because there were a few, I am sure many others also struggle with this concept. So I wanted to unpack this a bit further and also raise some more awareness around IQRs for transfer pricing purposes. What makes the IQR so interesting from a transfer pricing perspective is that not every tax authority applies the calculation of an IQR consistently.
This brings about some technical questions, for example, if one tax authority accepts an IQR that calculates a higher arm’s length range to another that does not, when using exactly the same data, what should I do? How will the tax authorities interpret this and what can a taxpayer do? I won’t go into further detail here, but let me know if this is something I should unpack in another post or touch base with me directly.
Let’s get back to the topic at hand and with that explain in more detail how to calculate the IQR Inclusive and IQR Exclusive ranges with an example. Thereafter I also managed to find some data from a secondary reference source on how other tax authorities determine the IQR in their jurisdiction. I am not certain if this is indeed correct as I was not able to find a primary reference source, so I won’t mention the jurisdictions but rather just provide the way the tax authority supposedly calculates the IQR. That is also why it is always important to double check your transfer pricing with a local specialist!
Ok here it goes.Continue reading “Interquartile range for transfer pricing, clear as mud!”