Operations & compliance
Transfer pricing true-up
A transfer pricing true-up is the calculation and booking of the difference between an entity's actual reported margin and the target margin required by group transfer pricing policy, typically performed quarterly or annually, and it is the mechanism that keeps a cost-plus or similar tested entity within its intended arm's.
True-ups work best when built into a regular monitoring cycle rather than left as a single year-end exercise, since quarterly monitoring catches drift early, gives management time to understand why an entity is off target, and avoids a single large correcting entry that draws unwanted attention at year-end. This matters in.
The calculation itself needs consistent inputs, meaning the same cost base and margin definition used in the benchmarking study must be used again in the true-up, otherwise the correction will not actually bring the entity back to the range the transfer pricing documentation claims it operates within. This matters in practice.
In practice
What matters when applying transfer pricing true-up
- Monitor margins quarterly, not just annually
- Use the same cost base as the benchmarking study
- Keep the true-up calculation documented
- Avoid single large year-end corrections
- Check VAT and customs treatment of the true-up
Frequently asked
Common questions
How often should a true-up be calculated?+
Quarterly monitoring with a formal true-up at year-end is best practice, since it catches margin drift early rather than leaving one large correction until the period closes. This matters in practice.
What makes a true-up defensible?+
Using the exact same cost base and margin definition as the underlying benchmarking study, and documenting the calculation clearly, is what makes a true-up defensible under audit. This matters in practice.
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.