Contractual terms
Start with contracts and correspondence, then test them against actual conduct.
Fifth practical workflow · NBR Guide v1.0
Back to the DMTT hubFrom an intra-group transaction to a documented adjustment
First determine whether the transaction enters the Guide's requirements, then test contract, conduct, functions, assets, risks and comparables before identifying a preliminary method candidate and documentation pack.
Arm's Length Principle
Do not start with the method; start by delineating the transaction
The tool does not calculate a market price or approve a transaction. It exposes scope, orders the analysis and prevents an unsupported adjustment from entering the full computation.
The result is an organisational indicator based on your selections, not a transfer-pricing study or professional opinion. NBR Guide v1.0 presents the NBR's current views, is not legally binding and does not replace the Law, Regulations or specialist advice. Madar stores none of this tool's answers.
Core comparability analysis
Five factors before selecting a method
Comparability is not a search for a nearby number; it tests whether independent parties would accept the same conditions in comparable circumstances.
Functions, assets and risks
Identify who does what, which assets are used, and who controls and assumes risk.
Property or service characteristics
Differences in type, quality and expertise may prevent direct comparison.
Commercial and economic circumstances
Market, location, competition, supply, demand and policy may change price or margin.
Business strategies
Review innovation, expansion, market penetration and strategies explaining a temporary outcome.
The Guide's five methods
Most appropriate for the facts, not easiest to calculate
No single method fits every transaction. Reliability depends on delineation, functional analysis, comparables and the ability to adjust differences.
Comparable Uncontrolled Price Method
A preliminary candidate when a reliable internal or external uncontrolled price exists and material differences can be adjusted reliably.
Resale Price Method
A preliminary candidate for a reseller buying from a related party and reselling independently without valuable marketing-intangible contributions.
Cost Plus Method
A preliminary candidate for services, semi-finished goods or long-term supply where a consistent direct-and-indirect cost base and comparable mark-up exist.
Transactional Net Margin Method
A preliminary candidate when a less complex tested party and a reliable net-profit indicator and comparables can be identified.
Profit Split Method
A preliminary candidate where both parties make unique and valuable contributions, operations are highly integrated, or significant risks are shared.
Selection rule in brief
If a traditional transaction method and a transactional profit method are equally reliable, the traditional method is preferred. If CUP and another method are equally reliable, CUP is preferred. The Arm's Length Principle does not require more than one method for one transaction.
Evidence pack
The Local File explains the transaction; the Master File explains the Group
Bahrain entities that are parties to covered transactions should prepare and maintain both files in the manner prescribed by the Regulations and Guide.
Local File
- Business, strategy, management structure and restructuring
- Transactions, parties, context and year-on-year changes
- Functional analysis, comparables, method and tested party
- Material agreements, APAs and tax rulings
- Financial statements and analysis-to-accounts tie-out
Master File
- Ownership structure and geographic footprint
- Profit drivers, supply chains, markets and important services
- Value creation, restructurings, acquisitions and disposals
- Intangibles, R&D and related policies
- Group financing, consolidated statements, APAs and rulings
The financial tie-out is not a cosmetic attachment
The allocation schedule should show how data used in the method ties to the annual financial statements. Once determined, the adjustment flows to Constituent Entity Income or Loss adjustments in the full-computation workflow.
Examples from the NBR Guide
Numbers raise the question; analysis determines the answer
The examples below are paraphrased and simplified from the NBR Guide to explain the method; they are not Madar-created scenarios.
Intra-group loan
The NBR example starts with lender and borrower functions, funding assets, and credit, liquidity, interest and currency risks; the rate is not selected from a generic table.
Volume may change comparability
A Bahrain party sold 1,000 tonnes to a related party at USD 80 per tonne and 500 tonnes independently at USD 100. The second price is not copied automatically; volume discounts and other terms are tested first.
Cost and mark-up
A manufacturer incurred BHD 50,000 and charged BHD 52,500, a 5% mark-up, while an independent comparable showed 15%. The difference triggers review, not an automatic adjustment before aligning cost bases and functions.
Net margin for a tested party
In the marketing-services example, comparable margins ranged from 5% to 7% and the less complex party earned 6%. The result followed tested-party, indicator and comparability-adjustment work.
Sources and connected provisions
Legislation first, then guidance, then application
The Guide explains the application approach and does not by itself create an obligation independent of the Law and Regulations.
DMTT Transfer Pricing GuideNational Bureau for Revenue · version 1.0 · June 2026 · 27 pages.
Decree-Law No. 11 of 2024Article 6: moving from financial accounting income to Constituent Entity Income or Loss.
Executive Regulations — Decision No. 172 of 2024Article 13: arm's length, the most appropriate method and documentation.