Document ID: chunk:federal_register_of_legislation:C2025C00029:section:2:p2
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 2 (pt 2/11)
Character Range: 7001235–7004247

(3) In identifying comparable circumstances for the purpose of this section, regard must be had to all relevant factors, including the following:
 (a) the functions performed, assets used and risks borne by the entities;
 (b) the characteristics of any property or services transferred;
 (c) the terms of any relevant contracts between the entities;
 (d) the economic circumstances;
 (e) the business strategies of the entities.
 (4) For the purposes of this section, circumstances are comparable to actual circumstances if, to the extent (if any) that the circumstances differ from the actual circumstances:
 (a) the difference does not materially affect a condition that is relevant to the method; or
 (b) a reasonably accurate adjustment can be made to eliminate the effect of the difference on a condition that is relevant to the method.

815‑130  Relevance of actual commercial or financial relations

Basic rule
 (1) The identification of the *arm's length conditions must:
 (a) be based on the commercial or financial relations in connection with which the actual conditions operate; and
 (b) have regard to both the form and substance of those relations.

Exceptions
 (2) Despite paragraph (1)(b), disregard the form of the actual commercial or financial relations to the extent (if any) that it is inconsistent with the substance of those relations.
 (3) Despite subsection (1), if:
 (a) independent entities dealing wholly independently with one another in comparable circumstances would not have entered into the actual commercial or financial relations; and
 (b) independent entities dealing wholly independently with one another in comparable circumstances would have entered into other commercial or financial relations; and
 (c) those other commercial or financial relations differ in substance from the actual commercial or financial relations;
the identification of the *arm's length conditions must be based on those other commercial or financial relations.
 (4) Despite subsection (1), if independent entities dealing wholly independently with one another in comparable circumstances would not have entered into commercial or financial relations, the identification of the *arm's length conditions is to be based on that absence of commercial or financial relations.
 (5) Subsections 815‑125(3) and (4) (about comparability of circumstances) apply for the purposes of this section.

815‑135  Guidance
 (1) For the purpose of determining the effect this Subdivision has in relation to an entity, identify *arm's length conditions so as best to achieve consistency with the documents covered by this section.
 (2) The documents covered by this section are as follows:
 (a) the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, as approved by the Council of the Organisation for Economic Cooperation and Development and last amended on 20 January 2022;
 (b) a document, or part of a document, prescribed by the regulations for the purposes of this paragraph.
 (3)