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The subject of transfer pricing assesses compliance with the principle of full competition[1] in operations carried out with related parties. (1). For this purpose, the OECD guidelines[2] defines five methods, among them and the most used, the net transactional operating profit method, hereinafter MNT.  This method consists in comparing the profitability of a company undergoing transfer pricing analysis versus the profitability obtained by a set of comparable companies that have similar activos, Roles and risks.

For the application of the MNT, a search for comparable companies is carried out through databases that collect information from companies that are publicly traded and a group of companies that share similarity with the company analyzed is finally established.

This article proposes a methodology to demonstrate whether there is a relationship between the level of investment in fixed assets or the property plant and equipment and the level of profitability of the companies.

To determine the real degree of comparability, it is necessary to assess the characteristics of the company. this includes the functions performed by the parties taking into account the assets used and assumed risks. (1)

n practice, quantitative and qualitative criteria are used for the selection of comparable to accept or reject comparable.  The quantitative criteria can be: the size of the company, intangible assets, volume of exports, relative or absolute value, when applicable, with respect to stocks, among others.

The proposed methodology seeks to assess the correlation that exists between the level of profitability, measured by the Operating Margin indicator on Net Sales (MO) with respect to the level of investment in Property, Plant and Equipment on Total Assets (PPE / TA).

To establish the relationship between MO and PPE / TA a correlational calculation of Pearson was performed. The Pearson correlation coefficient (r) is a common correlation measure that measures the relationship between two variables. (2).

With the use of TP Catalyst databases, the correlational analysis was carried out by making a first-stage selection where distortions such as different products or services, activities, companies domiciled in tax havens, companies with operational losses, among others, were discarded.

Once the respective purifications were performed; The correlation results in different industries analyzed are shown below:

Main division


# of companies



Logistics services, international cargo transportation



Banking and finances*



Hospitalization services



Property leasing



Rent a car




Manufacture of boards, veneers and plywood (wood)



Cement manufacturing



Textile manufacturing



Taps and sanitary ware manufacturing




Comercialization of materials of construction



Marketing of agrochemicals



Medication marketing




Sale of mass consumption products



Sale of retail vehicles



*In this case the ROA indicator was evaluated, (Return Over Assets) or Operating Margin on Operating Assets correlated with the portfolio level over total assets.

The results obtained show that the correlation coefficient is different for each of the industries, which means that the influence of the level of plant and equipment ownership on the company's profitability is not similar for each sector and that it depends on how useful the industry is to its fixed assets.

From the analysis performed, it was evidenced that there is only a moderate relationship[3] in the logistics services, international freight transport, vehicle rental and marketing of construction materials and agrochemicals industries; In these industries, the correlational analysis of the influence of assets on profitability could be performed.

Correlational analyzes can be performed to determine what types of assets influence industry, for example, intangibles, investment properties, the level of trade accounts receivable, the level of inventory, investments in associates; among others.

The correlational analysis of the operational profitability of the current year, versus the previous year can be used to determine the dynamics of an industry.


Ricardo Navarrete

TP Consulting Ecuador Manager



1. Organization for Economic Cooperation and Development OECD. Applicable OECD guidelines on transfer pricing to multinational companies and tax administrations. [trad.] Institute of Fiscal Studies (IFS). Paris : OECD editions, 2010. pág. 427.

2. Hopkins, Kenneth D., Hopkins, B.R. y Glass, Gene V. Basic statistics. México : Prentice-Hall Hispanoamericana, S.A., 1997.

[1] Principle of Full Competition: "(When) ... two (associated) companies are, in their commercial or financial relations, united by accepted or imposed conditions that differ from those that would be agreed by independent companies, the benefits that would have been obtained by one of the companies in the absence of such conditions, and which in fact have not been made because of them, may be included in the benefits of that company and be taxed accordingly"

[2] The Organization for Economic Cooperation and Development, establishes OECD Guidelines applicable in matters of transfer pricing to multinational companies and tax administrations.

[3] Considering those values that exceed a correlation index of 0.4 as moderate.

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