Profit Level Indicators (PLI)

Profit Level Indicators (PLI) in Benchmarking Report under Transfer Pricing Regulations

A profit level indicator (“PLI”) is a measure of a company’s profitability that is used to compare comparables companies profit level with the company having international transactions with its associated enterprises (tested party). A profit level indicator may express profitability in relation to (i) sales, (ii) costs or expenses, or (iii) assets.

In comparison with the resale price and cost plus methods several profit level indicators are allowed under the TNMM, which are all based on net profit. More specifically, the profit level indicator considered is the net profit margin relative to an appropriate base (e.g., costs, sales and assets). With the help of “profit level indicators”, the net profitability of the controlled transaction is compared to the net profitability of the uncontrolled transactions.