In situations where a proper transfer pricing risk assessment suggests that a thorough transfer pricing audit is warranted with regard to one or more issues, it is clearly the case that the tax administration must have the ability to obtain, within a reasonable period, all of the relevant documents and information in the taxpayer’s possession. This includes information regarding the taxpayer’s operations and functions, relevant information on the operations, functions and financial results of associated enterprises with which the taxpayer has entered into controlled transactions, information regarding potential comparables, including internal comparables, and documents regarding the operations and financial results of potentially comparable uncontrolled transactions and unrelated parties. To the extent such information is included in the transfer pricing documentation, special information and document production procedures can potentially be avoided. It must be recognised, however, that it would be unduly burdensome and inefficient for transfer pricing documentation to attempt to anticipate all of the information that might possibly be required for a full audit. Accordingly, situations will inevitably arise when tax administrations wish to obtain information not included in the documentation package. Thus, a tax administration’s access to information should not be limited to, or by, the documentation package relied on in a transfer pricing risk assessment. Where a jurisdiction requires particular information to be retained for transfer pricing audit purposes, such requirements should balance the tax administration’s need for information and the compliance burdens on taxpayers.
TPG2022 Chapter V paragraph 5.14
Category: B. Objectives of transfer pricing documentation requirements | Tag: Administrative-/compliance burden, Demand additional information, Information request, Transfer pricing audit, Transfer pricing documentation
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- TPG2022 Chapter V paragraph 5.15It may often be the case that the documents and other information required for a transfer pricing audit will be in the possession of members of the MNE group other than the local affiliate under examination. Often the necessary documents will be located...
- TPG2022 Chapter V paragraph 5.6Each of these objectives should be considered in designing appropriate domestic transfer pricing documentation requirements. It is important that taxpayers be required to carefully evaluate, at or before the time of filing a tax return, their own compliance with the applicable transfer pricing...
- TPG2022 Chapter V paragraph 5.13A third objective for transfer pricing documentation is to provide tax administrations with useful information to employ in conducting a thorough transfer pricing audit. Transfer pricing audit cases tend to be fact-intensive. They often involve difficult evaluations of the comparability of several transactions...
- TPG2022 Chapter V paragraph 5.16In order to achieve the objectives described in Section B, jurisdictions should adopt a standardised approach to transfer pricing documentation. This section describes a three-tiered structure consisting of (i) a master file containing standardised information relevant for all MNE group members; (ii) a...
- TPG2022 Chapter V paragraph 5.34For purposes of Annex III to Chapter V of these Guidelines, the Country-by-Country Report should include all tax jurisdictions in which the MNE group has an entity resident for tax purposes, regardless of the size of business operations in that tax jurisdiction....
- TPG2022 Chapter V paragraph 5.12There is a variety of tools and sources of information used for identifying and evaluating transfer pricing risks of taxpayers and transactions, including transfer pricing forms (to be filed with the annual tax return), transfer pricing mandatory questionnaires focusing on particular areas of...
- TPG2022 Chapter V paragraph 5.18The master file should provide an overview of the MNE group business, including the nature of its global business operations, its overall transfer pricing policies, and its global allocation of income and economic activity in order to assist tax administrations in evaluating the...
- TPG2022 Chapter V paragraph 5.47It is not recommended, particularly at the stage of transfer pricing risk assessment, to require that the transfer pricing documentation should be certified by an outside auditor or other third party. Similarly, mandatory use of consulting firms to prepare transfer pricing documentation is...
- July 2018: Transfer Pricing Practices in the Oil Sector, and their Potential Application to MiningIn July 2018 Center for Global Development published a study of special transfer pricing practices in the oil sector, and their potential application to hard rock minerals. According to the study, governments of mining countries are vulnerable to investors manipulating transfer prices as...
- OECD publishes Guidance on Pricing of Minerals6 November 2023 OECD published a transfer pricing framework on determining the price of minerals. The framework provide guidance for developing countries to accurately delineate the transaction and price mineral sales on an arm’s length basis. Specifically, it identifies the primary economic factors that...
Related Case Law
- Spain vs Representaciones Creta S.L., October 2018, Tribunal Supremo, Case No 1504/2018, STS 3632/2018 – ECLI:ES:TS:2018:3632Tax penalties/fines had been issued following a transfer pricing adjustments in regards of controlled transactions exempt from Spanish TP documentation requirements. An appeal was filed by the taxpayer claiming to be excluded from the Spanish penalty regime. The appeal was dismissed by the...
- Panama vs “Glass Corp”, February 2020, Administrative Tribunal, Case No TAT-RF-015“Glass Corp” Panama, was issued a fine for not filing (in time) Transfer Pricing Report – Form 930 – for the fiscal year 2012. Article 762-I of the Tax Code in Panama establishes that failure to comply with filing obligation of transfer pricing...
- Switzerland vs “X Furnishing AG”, April 2023, Federal Administrative Court, Case No A-742/2022The Portuguese tax authority requested the Swiss tax authority in a letter dated May 28, 2020 based on Article 25 of the DTT CH-PT to provide information regarding “A Furnishing SA” (hereinafter the Portuguese company) for the tax periods from September 1, 2015...
- Peru vs “Doc Request SA”, October 2017, Tax Court, Case No 5521-2017During an audit for the FY 2010 “Doc Request SA” was requested to submit information and supporting documentation on expense accounts, acquisitions of goods and services, ISC commission accounts paid etc. after the ordinary one-year audit period established by Article 62º-A of the...