It is also advisable to steer clear of incorporating “page-fillers” in TP documents, like extensive sections straight out of the TP Guidelines. This only serves to annoy the reader, be it the tax inspector or anyone else. It does not in any way contribute to the goal of clarifying the TP policies and practices to the reader. Copy-pasting TP Guidelines or other such material does not give the tax authorities the impression that the company is compliant with the TP documentation requirements or that the company’s TP model is aligned with the arm’s length principle.
Tax authorities tend to pick up on TP documentation that appears to be prepared as a compliance formality, prompting a closer look. They look unfavourably on master and local files that have a generic and template-style approach. Instead they prefer tailored documents that provide a sufficient degree of detail, allowing them to assess the TP model without having to ask for extra information and supporting documents. Companies should, therefore, ensure that their TP documentation is as detailed and specific as possible, accurately reflecting the operations. This involves moving beyond a tick-the-box mentality to provide a comprehensive and nuanced analysis of the functions, assets and risks employed/undertaken by the entities involved in the intercompany transactions.
