Introduction :

Transfer pricing include Arm's Length Principle:

Methods of Transfer Pricing :

Comparable Uncontrolled Price (CUP) Method:

1. This method compares the price charged for a controlled transaction between affiliated entities with the price charged for a comparable uncontrolled transaction between unrelated parties.
   
2. Requires a high degree of comparability between the controlled and uncontrolled transactions.
   

Resale Price Method (RPM):

1. Applicable when a company sells products to an affiliated reseller, and the resale price is used to determine an arm's length price.
   
2. The resale price is reduced by an appropriate gross margin to arrive at the arm's length price.
   

Cost Plus Method (CPM):

1. This method involves adding a markup on the cost of production incurred by the selling entity to arrive at an arm's length price.
   
2. The markup is based on what would be charged in a comparable uncontrolled transaction.
   

Transactional Net Margin Method (TNMM):

1. TNMM compares the net profit margin earned by a taxpayer from a controlled transaction to the net profit margin earned by comparable independent entities from comparable transactions.
   
2. It is expressed as the ratio of the net profit to an appropriate base (e.g., sales, assets, or costs).
   

Profit Split Method:

1. The profit split method is used when two or more affiliated entities contribute to the creation of value in a particular transaction.
   
2. It allocates the combined profit of the entities based on the relative contributions of each entity to the overall value creation.

Documentation Requirements:

Master File:

1. Overview of the multinational enterprise's global business operations.
   
2. Organizational structure, including a description of business activities, intangible assets, and financial activities.
   
3. A summary of the group's transfer pricing policies.
   

Local File:

1. Detailed information on the local entity's specific intercompany transactions.
   
2. Analysis of the functions performed, risks assumed, and assets employed by the local entity.
   
3. Comparable benchmarking data to justify the arm's length nature of the transactions.
   

Country-by-Country Report (CbCR):

1. Provides a high-level overview of the global allocation of the multinational enterprise's income, taxes paid, and certain indicators of economic activity.
   
2. Includes information on the group's entities, their activities, and their financial performance in each tax jurisdiction where they operate.
   

1. Explanation of the company's transfer pricing policy, the rationale behind the chosen transfer pricing methods, and how the arm's length principle is satisfied.
   

1. Detailed analysis of the functions performed, assets used, and risks assumed by each entity involved in the intercompany transactions.\
   
2. Identification of key value drivers and contributions of each entity to the value chain.
   

1. Selection of comparable companies or transactions used to support the arm's length nature of intercompany prices.
   
2. Analysis of financial data and relevant factors to demonstrate the comparability of the chosen comparables.
   

1. Financial statements of the entities involved in the intercompany transactions, including any adjustments made for transfer pricing purposes.
   

1. Copies of agreements governing intercompany transactions, such as contracts for the sale of goods, provision of services, or licenses of intangible property.
   

1. Details on the distribution of functions, assets, and risks among the related entities.
   
2. Explanation of how risks are allocated and managed within the group.
   

1. Any additional documentation that supports the positions taken in the transfer pricing documentation, such as market studies, industry reports, or other relevant data.

Global Taxation Impact:

Regulatory Compliance:

Country-by-Country Reporting: