Fundamentals
Transfer Pricing Documentation
Transfer pricing documentation is the written evidence a group prepares to demonstrate that its intercompany transactions are priced in line with the arm's length principle. It typically includes a master file describing the group, a local file covering specific entity transactions, and supporting benchmarking analysis.
The OECD's three-tiered documentation framework consists of a master file providing a global overview of the group's business and pricing policies, a local file detailing the specific related-party transactions of an individual entity, and country-by-country reporting for large groups above revenue thresholds. Most.
Well-prepared documentation should be contemporaneous, meaning it is created around the time transactions occur rather than reconstructed after an audit notice arrives. It should clearly explain the functional analysis, the chosen pricing method, the comparable data used, and the rationale for pricing outcomes, reducing the.
In practice
What matters when applying transfer pricing documentation
- Follows the OECD's master file, local file and CbCR structure
- Demonstrates pricing decisions are arm's length
- Should be prepared contemporaneously, not retrospectively
- Includes functional analysis and benchmarking evidence
- Reduces audit risk and supports faster dispute resolution
Frequently asked
Common questions
Is transfer pricing documentation mandatory?+
Most jurisdictions legally require transfer pricing documentation once a group or entity exceeds certain revenue or transaction value thresholds. Even where not strictly mandatory, maintaining documentation is strongly advisable as it demonstrates reasonable care and reduces exposure to penalties during a tax audit.
How often should documentation be updated?+
Documentation should generally be reviewed and updated annually to reflect changes in the business, market conditions, intercompany agreements and financial results, ensuring that the analysis remains current and defensible if tax authorities request it during an enquiry.
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.