ZAMBIA Law and Practice Contributed by: Mulenga Chiteba, Constance Namatai Mwango and Bwalya Milunga, Mulenga Mundashi Legal Practitioners
3.5 Comparability Adjustments There is no express requirement for compara - bility adjustments. However, when picking the most appropriate transfer pricing method, the tax authorities consider the degree of compara - bility between controlled and uncontrolled trans - actions, including the reliability of comparability adjustments. It is worth noting that the tax authorities may adjust the taxpayers’ results where the results fall outside the arm’s length range.
• the availability of reliable information needed to apply the selected transfer pricing method or other transfer pricing methods; and • the degree of comparability between con - trolled and uncontrolled transactions, including the reliability of comparability adjustments, if any, that may be required to eliminate differences between them. The rules provide that where the comparable uncontrolled price method and the other listed transfer pricing methods can be applied with equal reliability, the tax authorities would choose the comparable uncontrolled price method. Fur - ther, where the comparable uncontrolled price method, the resale price method, the cost plus method, the transactional net margin method and the transactional profit split method can be applied with equal reliability, the tax authorities would choose either the comparable uncon - trolled price method, the resale price method or the cost plus method. 3.4 Ranges and Statistical Measures The Transfer Pricing Rules provide for the arm’s length range, which is defined as a range of rel - evant financial indicator figures including prices, margins or profit shares produced by the appli - cation of the most appropriate transfer pricing method to a number of uncontrolled transac - tions, each of which is relatively equally com - parable to the controlled transaction based on comparability analysis (though in some cases not all examined comparable transactions will have a relatively equal degree of comparability). Further, the regulations provide for the interquar - tile range, which is used to enhance the reliability of the analysis where the range includes a size - able number of observations, and the taxpayer has made reasonable efforts to exclude points of lesser degree of comparability.
4. Intangibles 4.1 Notable Rules
Zambia’s Transfer Pricing Rules define “intangi- ble property” as including any property which is not a physical or financial asset, and is capable of being owned or controlled for use in commer - cial activities. This includes the following: • patent; • invention; • secret formula or process;
• design; • model; • plan; • trade mark; • know-how; or • marketing intangible.
For transactions that involve intangible property such as licences and sales, the determination of the arm’s length conditions for controlled trans - actions between associated parties takes into account both the perspective of the transferor of the property and the perspective of the trans - feree. Such transactions also take into account the pricing at which a comparable independent enterprise would be willing to transfer the prop -
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