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October 15, 2023
18 min read
CPM vs TNMM: What's the Difference?

Borys Ulanenko
CEO, ArmsLength AI

TL;DR - Key Takeaways
- CPM (US) and TNMM (OECD) are essentially the same transfer pricing method with different names, both examining net profit indicators of related-party transactions.
- Both methods use a 'tested party' approach, selecting the less complex entity without unique intangibles to benchmark against comparable companies.
- These methods have become dominant globally due to practical advantages: tolerance for functional differences and easier access to comparable data.
- Understanding jurisdictional nuances in implementation is crucial to prevent double taxation and successfully defend transfer pricing positions.
- Case law shows that proper selection of comparables and consideration of unique intangibles are critical for a successful CPM/TNMM analysis.
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