Most countries directly enforce transfer pricing through specific statutory language, regulations, rules, or laws.  Most countries either subscribe to an IRC Section 482 - Treasury Regulations Section 1.482 model or alternatively a European based OECD Guideline Model, or some variant thereof.  Some countries utilize a more indirect “discretionary authority statute” to enforce transfer pricing statues, regulations, rules, and laws that all encompass variations of the arm’s length standard. 

The core elements for most countries for the annual contemporaneous documentation transfer pricing requirement include those that follow below. Variants of these core elements of documentation may exist on a country-specific basis.

  • A business overview
  • A description of the organizational structure of the multinational organization
  • A “Best Method” selection, identification of the Tested Party, and characterization of the Tested Party
  • An analysis of the controlled transactions
  • An identification of comparables
  • An economic analysis
  • Relevant data obtained after year end, and
  • An index and any other relevant documents 
Failure to comply with transfer pricing laws, regulations, rules, statutes, and enforcement efforts can results in egregious penalties and potentially have a major impact on other international tax planning efforts or positions if a transfer pricing adjustment is made by reallocation of income or denial of a deduction.  The severity of civil penalties varies by country and the Statutes of Limitations can run up to seven years in some cases.  The experience of Thompson Dunavant Global Solutions and its seasoned practitioners is that transfer pricing inquiries are most quickly and inexpensively terminated when the multinational taxpayer has attempted to meet the “Best Efforts” or “Reasonable Efforts” standards promulgated by the respective tax authorities.  


Thompson Dunavant Global Solutions has also provided compliance solutions for FIN 48 analysis and Sarbanes-Oxley issues as they relate to transfer pricing and international tax issues. Filing a tax return in many countries now requires an affirmation that transfer pricing due diligence has been conducted either by checking a box on the tax return with a description of the analysis that was conducted or alternatively filing attendant forms or statements with the tax return.