Transfer pricing begins with what group entities actually do, not with a markup selected at year-end.
Tax head and CFO
At transaction design, annual documentation
Create a related-party transaction register.
Group structure and agreements.
Identify associated enterprises and covered transactions under the applicable income-tax law. The legal entity, period and governing Act should be tagged during the 2026 transition.
Functional analysis explains who performs functions, uses assets, controls risks and owns intangibles. Contracts should agree with operational reality.
Method selection and benchmarking need contemporaneous data and reasons. Compliance forms, accountant reports and documentation thresholds should be checked under current law.
| Control | What it covers | Operating rule |
|---|---|---|
| Transaction map | All cross-border and covered domestic dealings are identified. | Include services, loans and intangibles. |
| FAR analysis | Functions, assets and risks are allocated. | Test actual conduct. |
| Pricing method | Most appropriate method and comparables are documented. | Explain adjustments. |
| Reporting | Forms and documentation are filed and retained. | Reconcile to books and FLA. |
Review pricing before the transaction begins so the company can invoice, collect and account consistently.
Document business restructurings, IP transfers, funding changes and loss-making periods because they often receive greater scrutiny.
Record the decision, owner, due date and evidence expected. A verbal explanation should become an approved working, board note, contract amendment, statutory filing or reconciliation before the item is treated as closed.
Rules, forms, thresholds and procedures can change. Use the latest official source and the actual company facts rather than copying a prior-year control or another entity’s legal position.
Classify every exception as a timing difference, data error, missing document, legal non-compliance, control-design gap or control-operating failure. This prevents management from treating fundamentally different problems as one ageing list.
The exception file should show amount or exposure, root cause, immediate correction, preventive action, owner and board-escalation threshold. Repeated low-value issues can become material when they reveal weak systems or management override.
Close the item only after the evidence agrees across source documents, books, portal data and management reporting. A screenshot or email promise is not equivalent to a completed filing, lender waiver, signed contract or reconciled ledger.
The control should operate across the full transaction population, not only the samples management expects a reviewer to inspect. For this topic, the key stages are transaction map, far analysis, pricing method, reporting. Each stage should identify the source system, preparer, reviewer, deadline and evidence retained.
A useful management review asks whether the legal document, accounting entry, bank movement, tax treatment and public filing describe the same event. Differences may be valid, but they should be reconciled through a dated working rather than explained from memory during audit or diligence.
Materiality should determine escalation, not whether the company keeps a record. Repeated small exceptions can show weak master data, unclear authority, system bypass or management override. Root cause and preventive action should therefore be documented separately from the immediate correction.
Tag every working with the legal entity, counterparty residence, transaction date, reporting period and governing law. During the 2026 income-tax transition, the date income arose can be more important than the date a form or payment is submitted.
Cross-border and tax records should reconcile to the general ledger, bank statement, contract, invoice and statutory return. Filing one correct form does not cure a different missing event report, withholding obligation or corporate approval.