Transfer pricing compliance issues: managing risk

Transfer pricing presents significant potential risks, but carrying out extensive detailed work can be time consuming while providing little certainty. What is required is a practical approach to manage transfer pricing risks. Key issues to consider when managing risk include the following: identifying all intra-group transactions; carrying out sufficient function and risk analysis to ensure the transactions are properly characterised; applying transfer pricing methods and prepare documentation in line with territory requirements and reflecting the level of risk; putting in place intercompany agreements; using APAs where available; monitoring and maintaining the policy and documentation.