Fundamentals
Transfer Pricing Audit
A transfer pricing audit is an examination conducted by a tax authority to assess whether a business's intercompany transactions have been priced in accordance with the arm's length principle. Auditors typically review documentation, financial data and benchmarking analysis before deciding whether an adjustment to taxable.
Audits often begin with an information request covering intercompany agreements, financial statements, functional analysis and benchmarking studies, followed by detailed questioning about how the group's pricing method was selected and applied. Auditors may challenge the choice of comparables, the functional characterisation of.
Businesses that maintain contemporaneous, well-organised documentation are generally better positioned to respond quickly and credibly during an audit, reducing the risk of unfavourable adjustments. Preparing in advance, keeping benchmarking analysis current, and being able to clearly explain the commercial rationale behind.
In practice
What matters when applying transfer pricing audit
- Tests whether intercompany pricing meets arm's length standards
- Involves review of documentation, data and benchmarking
- Auditors may challenge comparables or entity characterisation
- Contemporaneous documentation strengthens the response
- Good preparation shortens and de-risks the process
Frequently asked
Common questions
How long does a transfer pricing audit take?+
Transfer pricing audits can take anywhere from several months to a few years to resolve, depending on the complexity of the transactions involved, the quality of documentation available, and whether the dispute escalates to mutual agreement procedures or litigation between the taxpayer and authority.
What documents are usually requested in an audit?+
Tax authorities commonly request intercompany agreements, group and local transfer pricing documentation, financial statements, functional analysis, benchmarking studies and correspondence explaining pricing decisions, so having these readily available and up to date significantly eases the audit process.
See how the tooling handles this in practice
Our transfer pricing tools calculate intercompany charges, benchmark financing and reconcile the intercompany ledger from your own data. Book a short walkthrough and we will show the workflow on a scenario that matches your group structure, rather than a generic demo dataset.