B.1.10.3. It is generally accepted that transfer pricing is not an exact science and that the application of transfer pricing methods requires the application of information, capabilities and assessments on the part of both tax payers and tax authorities. Given the skills, information and resource gaps in many developing countries, this can be very difficult for these developing countries; the task often requires the best public servants who can leave the tax department after acquiring their particular skills. The purpose of this manual is to reduce these gaps. B.1.10.7. Faced with these problems, critics of current transfer pricing methods equate the fact that a satisfactory search for a needle in a haystack is comparable. Overall, it is clear that finding appropriate comparables in developing countries is probably the main practical problem facing businesses and tax authorities today, but the purpose of this manual is to support this process in a practical way. The toolkit developed jointly by the IMF, OECD, UN and World Bank provides additional guidelines on this issue. Chapter B.2 of this manual provides analysis and practical examples of comparability analysis. B.1.6.27. In a CCA, there is not always an ultimate benefit; than an expected benefit during the CCA, which may or may not occur. The interest of each participant should be agreed from the outset.
Contributions must be consistent with the amount that an independent entity would have contributed, in similar circumstances, to these expected benefits. The CCA is not a transfer pricing method; It`s a contract. However, it can have transfer pricing effects and must therefore respect the principle of arm length. China`s rules provide a general framework for cost-sharing agreements.  These include a basic structure for agreements, provision for redemption and exit payments on the basis of reasonable amounts, a minimum operating period of 20 years and mandatory notification of the SAT within 30 days of the conclusion of the agreement. One drawback is that this method does not necessarily encourage the procurement department to be efficient in manufacturing practices and, in fact, it may be less effective when it comes to limiting things such as material work and overall cost differentials. Internal teams can become lazy, receive costs over time, but don`t get really competitive prices. In taxation and accounting, transfer pricing refers to the rules and methods of pricing transactions within and between entities that are under joint ownership or control.
Because of the ability of cross-border controlled transactions to distort taxable income, tax authorities in many countries can adjust intragroup transfer prices that are different from those allegedly charged by independent companies that act on arm length (arm length principle).   The OECD and the World Bank recommend intragroup pricing rules based on the “arms and lengths” principle, and 19 of the 20 G20 members have adopted similar measures through bilateral treaties and national legislation, regulations or administrative practices.    Countries with transfer pricing laws generally comply with OECD transfer pricing guidelines for multinational companies and tax administrations on most issues, although their rules may differ in some important details.  Transfer pricing rules ensure fairness and accuracy of transfer pricing between related companies. The rules impose the rule on arms length transactions, which states that companies must set prices on the basis of similar transactions between independent parties. It is closely monitored in a company`s financial reports. The Comparable Benefits (CPM) method was introduced in the proposed regulations in 1992 and has been a major feature of IRS transfer pricing practice ever since.