What is Transfer Pricing Documentation ?
Transfer pricing documentation is the records and evidence that a taxpayer should make available to tax authority in order to demonstrate that the results of transactions with related parties are determined for tax purpose according to the transfer pricing regulations in a given jurisdiction (and, in particular, the application of the arm’s length principle).
What are the Objectives of Transfer Pricing Documentations?
According to Discussion Draft on Transfer Pricing Documentation and CbC Reporting, OECD 30 January 2014, three objectives for requiring transfer pricing documentation are:
- To provide tax administrations with the information necessary to conduct an informed transfer pricing risk assessment;
- To ensure that taxpayers give appropriate consideration to transfer pricing requirements in establishing prices and other conditions for transactions between associated enterprises and in reporting the income derived from such transactions in their tax returns; and
- To provide tax administrations with the information that they require in order to conduct an appropriately thorough audit of the transfer pricing practices of entities subject to tax in their jurisdiction.