Transfer Pricing Representation
Transfer Pricing Representation usually is required by law. This representation must substantiate how the intercompany business is set up and evidencing that the intercompany pricing applied would have been applied between third parties as well. In many countries taxpayers are obliged to have transfer pricing representation when a taxpayer performs intercompany transactions. Depending on the jurisdiction this representation should be submitted annually, where in other countries this representation should be submitted upon request of the tax authorities or sometimes taxpayers are required to prepare contemporaneous representation. Having adequate transfer pricing representation available helps to prevent companies being confronted with a shift of the burden of proof with respect to transfer pricing adjustments imposed by tax authorities, as well as double taxation. Moreover, non-compliance with transfer pricing representation requirements can sometimes lead to penalties.