How Benchmark Analysis Built a Defensible TP Position for a Manufacturer: A Case Study

A benchmark analysis goes beyond Transfer Pricing Documentation (TP Doc). It can establish an arm’s-length range, support pricing decisions, and provide evidence during tax authorities’ review of the company’s transfer pricing position. 

In this case, InCorp Indonesia (an Ascentium Company) supported a foreign-owned manufacturing company (PT PMA) with a benchmark analysis for a fully-fledged manufacturing transaction. The analysis was incorporated into the client’s Local File and subsequently reviewed during a tax audit.

Key Takeaways

• A foreign-owned manufacturing company completed a benchmark analysis for its related-party transactions, supporting a more defensible TP position. 
• TNMM and CUP/CUT were applied to assess the transactions and establish an appropriate arm’s-length range. 
• The benchmark analysis was incorporated into the Local File, strengthening the client’s Transfer Pricing Documentation. 
• The benchmarking approach and resulting arm’s-length range were accepted during a tax audit without significant adjustment. 
• InCorp Indonesia (an Ascentium Company) managed the benchmarking approach, comparable review, arm’s-length assessment, and Local File integration throughout the engagement. 

Benchmark Analysis Case Study: An Overview 

Area	Case Details
Client	Manufacturing PT PMA
Main need	Support the arm’s-length nature of related-party transactions and strengthen Transfer Pricing Documentation
Transactions covered	Sale/purchase of goods, intragroup services, royalties, intercompany financing, toll/contract manufacturing, and distribution
Methods applied	TNMM and CUP/CUT
Key challenge	Finding relevant comparables across different business functions, geographic markets, and financial profiles
InCorp support	Benchmarking approach, comparable search and review, arm’s-length assessment, and Local File integration
Result	More defensible arm’s-length support and stronger Transfer Pricing Documentation
Tax audit outcome	Benchmarking approach and resulting arm’s-length range accepted without significant adjustment

Benchmark Analysis Challenges for the Foreign-Owned Manufacturing Company 

The company needed benchmark analysis to support the arm’s-length nature of its fully fledged manufacturing transaction and strengthen its Transfer Pricing Documentation. 

The key challenge was ensuring that the analysis was up to date, supported by suitable comparables, and robust enough to withstand potential tax authority review of the client’s TP position. 

Establishing an Appropriate Arm’s-Length Range 

The benchmark analysis was needed to determine an appropriate arm’s-length range for the manufacturing transaction and to demonstrate compliance with the arm’s-length principle. 

Finding Suitable Comparables 

Finding sufficiently comparable companies and transactions was challenging because potential comparables differed in: 

• Business functions 
• Geographic markets 
• Financial profiles 

The search therefore required more detailed screening to ensure the selected comparables were relevant and defensible.

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How InCorp Built the Benchmark Analysis 

InCorp Indonesia (an Ascentium Company) conducted the benchmark analysis across the client’s related-party transactions, including: 

• Sale and purchase of goods 
• Management and other intragroup services 
• Royalties and other intangible-related transactions 
• Intercompany loans and financing 
• Toll/contract manufacturing 
• Distribution activities 

Applying TNMM and CUP/CUT Method 

The team used the Transactional Net Margin Method (TNMM) and the Comparable Uncontrolled Price/Transaction Method (CUP/CUT), depending on the nature of the transactions and the availability of reliable comparable data. 

The tested party and financial indicators were selected based on functional analysis and transaction characteristics. 

Refining the Comparable Search 

The team refined the search criteria and reviewed comparable companies and transactions, particularly where differences existed in: 

• Business functions 
• Geographic markets 
• Financial profiles 

Appropriate adjustments were made where necessary to improve the reliability of the analysis. 

Establishing the Arm’s-Length Range 

The benchmark analysis established the client’s arm’s-length range and assessed whether its pricing or profitability fell within it. 

• If results were below the range, the team reviewed the reasons and recommended appropriate adjustments.  
• If profitability was above the range, the result was assessed in the context of the transaction and the overall TP position, rather than being automatically treated as an issue. 

The analysis was then incorporated into the Local File and used to identify TP risks and support future related-party pricing decisions. 

The Result: Stronger TP Support and Audit Outcome 

The benchmark analysis established a more defensible arm’s-length range and strengthened the client’s Transfer Pricing Documentation. 

Stronger Transfer Pricing Documentation 

The benchmark provided clearer support for the arm’s-length nature of the client’s related-party transactions and strengthened the analysis incorporated into the Local File. 

Clearer TP Risk and Pricing Basis 

The analysis helped identify potential transfer pricing adjustment risks and provided a reliable basis for setting or reviewing future related-party pricing. 

Supported During a Tax Audit 

The benchmark analysis was subsequently reviewed during a tax audit. The tax auditor accepted the benchmarking approach and resulting arm’s-length range without requiring a significant adjustment. 

This case study demonstrates the practical value of benchmark analysis that supports both ongoing Transfer Pricing Documentation and the client’s TP position during tax authority review. 

Why Benchmark Analysis Matters for a Foreign-Owned Manufacturing Company 

As of 2026, PMK 172/2023 remains Indonesia’s principal regulation governing the application of the arm’s-length principle and Transfer Pricing Documentation. 

For manufacturers with related-party transactions, benchmark analysis supports both Transfer Pricing Documentation and pricing decisions. 

The analysis should reflect: 

• The actual transaction and operating model 
• Functions, assets, and risks 
• Relevant and up-to-date comparables 
• Consistent financial results and intercompany arrangements 

This becomes especially important when the tax authorities review the company’s TP position. 

How InCorp Indonesia Supports Benchmark Analysis 

A proper benchmark analysis must link the company’s actual transactions to reliable, independent evidence. 

InCorp Indonesia (an Ascentium Company) supports businesses throughout the benchmarking process, including: 

• Transaction and functional assessment to understand the commercial arrangement and relevant functions, assets, and risks; 
• Transfer pricing method selection based on transaction characteristics and available data; 
• Comparable company and transaction searches using relevant screening criteria; 
• Financial and comparability analysis to assess the reliability of potential comparables; 
• Arm’s-length range determination to support related-party pricing; 
• Local File integration to align the benchmark with Transfer Pricing Documentation; and 
• Benchmark review and refresh in response to changes in transactions, financial data, pricing policies, or tax authority scrutiny. 

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