Documentation of Transfer Pricing: A New Global Approach

This research paper investigates two important tax issues: (a) an investigation of global documentation of transfer pricing around the world and suggests a new approach for managing transfer pricing documentation and (b) a comparison between the Organization for Economic Cooperation and Development (OECD) guidelines and the documentation requirements of selected countries. Multinational companies (MNCs) should design a well workable transfer pricing systems to comply with documentation tax rules of all countries, otherwise; huge penalties will be imposed. This paper suggests the use of a three-tiered approach, which is called a regional documentation file, for transfer pricing. The suggested approach is a modification of the ones suggested by the OECD. It will include information about regional business and economic conditions of the region, a description of the intangibles used for this specific area, and consolidated financial statements by region and tax documents. Moreover, it will make a significant cost reduction for MNCs in the preparation of transfer pricing documentation.