Surviving a Transfer Pricing Assessment

What a TP assessment actually tests

A transfer pricing assessment examines whether related-party transaction pricing genuinely reflects an arm's-length outcome — and critically, whether that can be demonstrated through documentation prepared at the time, not reconstructed after the fact.

What holds up under scrutiny

• Contemporaneous documentation — analysis and benchmarking prepared around the time of the transaction, not assembled retrospectively once an assessment notice arrives
• A genuinely comparable benchmarking set — comparables that match on function, market, and risk profile, with the selection criteria clearly explained
• A clear functional analysis — a well-articulated description of what each party actually does, what assets it uses, and what risks it bears, consistent with how the business actually operates day to day
• Intercompany agreements that match the economic reality of the transactions, not generic templates inconsistent with actual practice

Common weaknesses assessing officers identify

• Benchmarking studies that use stale or poorly matched comparables
• Functional analysis that doesn't match how the business actually operates in practice
• Documentation assembled only after the assessment notice was received, rather than maintained contemporaneously
• Intercompany agreements that don't align with actual transaction flows or pricing

What to do once an assessment notice arrives

Review your existing documentation critically before responding — identify gaps honestly rather than assuming what was prepared originally is sufficient. Where the underlying analysis is genuinely solid, the response should focus on presenting it clearly; where there are real gaps, it's better to know that early and address them thoughtfully than to be caught unprepared during the assessment.

The real lesson

The businesses that navigate TP assessments most smoothly are almost always the ones that treated documentation as an ongoing discipline tied to when transactions actually happen — not an annual filing exercise completed just to meet the Form 3CEB deadline.

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