TRANSFER PRICING DOCUMENTATION
Comprehensive compliance solutions tailored to your needs
We specialize in delivering detailed transfer pricing documentation to meet both local and international compliance requirements. Following the principles set by the OECD Guidelines, we provide expert assistance in developing the three-tier documentation framework, including:
- Local File: Preparation and review of detailed documentation for specific jurisdictions.
- Master File: Preparation and review of comprehensive reports reflecting global operations.
- CbCR (Country-by-Country Reporting): Review of the information to ensure clarity, accuracy, and compliance.
Our process
Review
Based on documents provided by the client, we conduct a desk review that includes:
- Verification of the economic reality and fact patterns presented in the report.
- Alignment with legal agreements, financial accounts, and intercompany flows disclosed in the documentation.
Preparation
We prepare reports that adhere to OECD guidelines and local regulatory requirements.
- Master File: Comprehensive global operations overview.
- Local File: Jurisdiction-specific documentation, customized to regulatory needs.
Our meticulous approach ensures that your documentation is not only compliant but also defensible during audits or inquiries from tax authorities.
Local File Content
- A description of the management structure of the local entity, including:
- An organizational chart.
- A description of individuals who maintain principal offices across relevant countries.
- Detailed business and financial activities, highlighting:
- Any involvement in business restructuring or intangible transfers.
- Key competitors.
- A description of material controlled transactions, including:
- Purchases of goods and services.
- Royalties, interest, and other intercompany payments.
- Identification of associated enterprises involved and their relationships.
- Functional analysis:
- Roles performed, risks assumed, and assets used.
- Comparability studies and benchmarking.
- Selection of the most appropriate transfer pricing method and rationale.
- Annual local entity financial accounts (audited statements preferred).
- Summary schedules of financial data used in the analysis.
- Copies of tax rulings related to controlled transactions.
Master File Content
- A chart illustrating the group’s legal and ownership structure.
- Geographical locations of operating entities.
- General written description of the group’s business operations.
- Key drivers of profitability.
- Description of the supply chain for key products/services (those exceeding 5% of group turnover).
- Overview of R&D operations, ownership, and use of intangibles.
- Cost contribution agreements and principal research agreements.
- List of key intangibles for transfer pricing purposes and the entities owning them.
- Description of financing arrangements with related and unrelated entities.
- Identification of entities providing centralized financing functions.
- Consolidated financial statements for the fiscal year.
- Summary of advance pricing agreements (APAs) or tax rulings impacting income allocation.
Country-by-Country Reporting (CbCR)
The Country-by-Country Report (CbCR) is an essential part of the OECD’s three-tiered transfer pricing documentation framework. It provides tax authorities with a high-level view of a multinational enterprise’s (MNE) global allocation of income, taxes paid, and key economic indicators. This report helps identify transfer pricing risks and potential audit areas.
Required Content of the CbCR
- Revenues:
- Unrelated party revenue
- Related party revenue
- Total revenue
- Profit (Loss) before Income Tax: Profit or loss before tax expenses.
- Income Tax Paid (Cash Basis): Total income tax paid during the reporting period.
- Income Tax Accrued (Financial Basis): Taxes accrued based on accounting records.
- Stated Capital: Reported equity for each jurisdiction.
- Accumulated Earnings: Retained earnings for each jurisdiction.
- Number of Employees: Count of full-time employees.
- Tangible Assets: Value of physical assets (excluding cash and equivalents).
- Entity Name: Name of each subsidiary or branch.
- Tax Jurisdiction: Jurisdiction of incorporation and residence.
- Main Business Activities: Selected from predefined categories:
- Research and development
- Manufacturing or production
- Sales, marketing, or distribution
- Internal group finance
- Administrative services
- Holding intellectual property
- Insurance or dormant status
Additional Information: Any explanations that clarify the nature of an entity’s activities or financial position.
- Explanations of discrepancies or unusual results.
- Significant business restructurings or changes in the MNE’s structure.
- Unusual financial or tax outcomes in specific jurisdictions.
- CbCR must be filed annually in the jurisdiction of the ultimate parent entity.
- Applies to multinational groups with consolidated revenue exceeding €750 million.
- Tax authorities share the report with other jurisdictions through automatic exchange agreements.
The CbCR aims to:
- Increase Transparency: Provide tax authorities with a global view of MNE operations.
- Enhance Risk Assessment: Identify jurisdictions with potential profit shifting.
- Ensure Compliance: Support tax authorities in enforcing local and international regulations.
