Meaning
Statutory records prepared at the time of a transaction provide a justification for the prices charged between related corporate entities. The set of records known as transfer pricing contemporaneous documentation details the economic analysis used to prove that intra-group trades occurred at the market rate. It governs the transparency of financial dealings between a parent company and its local subsidiaries to prevent tax avoidance.
This requirement stops once the tax bureau accepts the annual return and the statute of limitations for an audit expires. It applies to any enterprise that meets the annual transaction thresholds set by the state taxation administration.
Submission Deadline
Corporations must finalize these reports by the end of June in the year following the transactions. Although transfer pricing contemporaneous documentation is not submitted with the tax return, the file must be available for inspection within twenty days of a formal request. Missing this deadline triggers an automatic penalty and subjects the company to a full-scale tax audit.
Analysis Depth
Every report must include a functional analysis of the risks and assets used by each party in the supply chain. In transfer pricing contemporaneous documentation, the selection of a comparable pricing method is the most critical step. Drafters must search for similar transactions between independent companies to validate the internal price.
Penalty Shield
Maintaining these files provides a defense against the imposition of interest on tax adjustments. A complete transfer pricing contemporaneous documentation package demonstrates a good faith effort to comply with the law and reduces the likelihood of a state-initiated investigation.
