Transfer pricing documentation is the evidence that related-party transactions were priced at arm's length. A strong file tells a clear story: who does what, who bears which risk, and why the chosen method fits.
Core components
A defensible file usually covers the group and entity profile, a description of each international transaction, a functions, assets and risks analysis, the selection of the most appropriate method, and a benchmarking study with documented search criteria.
Consistency with reality
Documentation must reflect how the businesses actually operate. Inconsistency between the written policy, the contracts and the real behaviour of the parties is a frequent cause of adjustments.
Plan early
Preparing the analysis before year-end gives time to correct pricing rather than merely explain it afterwards. This article is general information and not advice on any specific case.