Transfer pricing: Leading documentation practices for multinationals

August 2013
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Transfer pricing: Leading documentation practices for multinationals

At a glance

Nearly 100 countries around the world have rules governing transfer pricing and nearly all require documentation either to be submitted or in place at the time the tax return is filed or when requested by the tax authority.

The US requires contemporaneous documentation as described in Treas. Reg. section 1.6662-6(d)(2)(iii) – to be in place at the time the return is filed in order to obtain penalty protection.

Transfer pricing adjustments continue to be a key focus of the Internal Revenue Service (IRS) and foreign tax authorities as they can result in large tax deficiencies. A proactive approach to analyzing and documenting inter­company transactions on an enter­prise-wide basis is vital to managing transfer pricing audit risk for multina­tional companies. Leading practices dictate that transfer pricing policies and procedures be documented in a cogent, concise, complete, coordinated and contemporaneous manner in order to achieve more favorable outcomes in a controversy situation.