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.