Article 38 - Fair Market Value

The value of the supply shall be the fair market value instead of the agreed consideration, between the parties to the transaction, when all of the following conditions are met:^[56]

1. The Supply shall be made between two related persons or between two persons who are under common control, as known in the agreement or this Regulation.

2. The value of the supply shall be less than the fair market value.

3. The recipient of the supply shall not be entitled to a full input tax deduction in respect of the supply.

For the purposes of the first Paragraph of this Article, the Fair Market Value is the Consideration that would be payable for a Similar and Contemporaneous Supply of Goods or services freely offered and made between Persons who are not Related Persons.

A Similar and Contemporaneous Supply means another Supply of Goods or services supplied at the same time that are either identical to, or closely or substantially resemble, the Goods and services being supplied. This shall be ascertained based on all relevant factors including the characteristics, quality, quantity of the Goods and services, the place and date of Supply and reputation of the Supplier.

In cases where the value of a Similar and Contemporaneous Supply is not able to be ascertained, the Taxable Person or Authority may prescribe an alternative Fair Market Value based on other comparable transactions which resemble the supply of Goods and services, or the costs of the Supplier to make the supply, whichever is higher (with the decision of the Authority to prevail in the event of a difference).