5 Questions To Ask When Reviewing TP Documentation Compliance

Max Stobbe — Digital Transfer Pricing Director, Aibidia

As a transfer pricing consultant, I sometimes couldn’t see the wood for the trees at the end of the documentation season. Preparing documentation for large clients operating in more than a dozen countries could represent a daunting task. The issue was often getting lost in ensuring content consistency across reports at the cost of losing the big picture. If you are in a similar situation or need to cross-check your advisor’s deliverables, take a step back and answer the following 5 questions:

  1. What type of documentation do you exactly need to have for each country? This could include an OECD master and local file or country-specific report similar to a master or local file, a Country-by-Country Report (CbCR), CbCR reporting notifications, and transfer pricing-related tax return forms.
  2. What are the country-specific content requirements for each type of documentation? Each country may have a list of information they’d like to see in your documentation.
  3. Do you need to have the report ready and submit when tax authorities ask for it or do you need to file the documentation at a certain date without tax authorities asking for it? In the former case, the relevant date of completion of the analysis or the report may depend on the timing of the transaction under analysis, contemporaneous requirements (often) linked to the tax return submission date, or the time given to submit the report. Meeting the relevant deadlines is often crucial to avoid late filing and transfer price adjustment penalties.
  4. By when do you need to have the reports prepared or filed? Note that during the current pandemic tax authorities may have extended tax return and transfer pricing-related deadlines.
  5. How high is the cost of non-compliance and the associated penalties according to country-specific regulation? Here it is important to pay attention to the size of your group’s transactions and any thresholds indicated by local requirements.

Ultimately, you will be best prepared for an audit if your transfer prices are determined with a well-prepared transfer pricing analysis. Where there are no transfer price adjustments there can only be late filing penalties. Be confident with the analysis prepared and revisit your analysis if certain relevant fact patterns were missed (such as available internal comparable uncontrolled prices or effects from business restructurings). Additionally, ensure your advisors have initially set up a global transfer pricing policy in line with OECD guidelines and country-specific rules or regulations and paid attention to current case law.

If you need assistance reach out to your advisors and get in touch with the transfer pricing experts at Aibidia.

Aibidia was founded by transfer pricing experts for transfer pricing experts to bring automation and advanced analytics to this critical finance function. Our cloud-based platform enables a shift in focus from documentation creation and data entry to value creation and insight on a global scale. Founded and headquartered in Helsinki, Finland, Aibidia’s team of veteran tax, legal, and technology experts closely collaborates with customers across the globe.