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Product manual · Chapter 9 of 14

Transfer pricing: transactions, FAR and method

Transfer pricing in TaxOrch is the controlled transaction inventory, its functional analysis, the method chosen and why, and what documentation may rest on. Documentation may rest on an approved transaction and on nothing else. The sample group is Sample Holdings Ltd with Sample Distribution GmbH (sample) and Sample Services BV (sample).

Download as PDF (opens in a new tab)4 min read · Group tax teams and advisers preparing transfer pricing documentation.

  1. Record group entities and agreements

    The Group entities tab lists each entity with its jurisdiction; Agreements holds the signed intra-group agreements a transaction can cite (a distribution agreement for Germany, an intra-group services agreement). A transaction without an agreement is recorded as such.

  2. Build the transaction inventory

    The Transactions tab counts controlled transactions, how many are approved for documentation and how many are still being analysed. Record a transaction adds one with the tested party, counterparty, amount and method. The sample inventory holds three: a sale or purchase of goods at €4,200,000.00 (TNMM, approved), a licence of intangibles at €126,000.00 (method not chosen, recorded) and a provision of services at €860,000.00 (cost plus, recorded).

    The TaxOrch Transfer pricing page showing 3 controlled transactions, 1 approved for documentation and 2 still being analysed, and a table of three sample transactions with tested party, counterparty, amount, method and stateThe TaxOrch Transfer pricing page showing 3 controlled transactions, 1 approved for documentation and 2 still being analysed, and a table of three sample transactions with tested party, counterparty, amount, method and state

    The controlled transaction inventory: three transactions, one approved for documentation.

  3. Open a transaction and check completeness

    Each transaction shows its tested party and counterparty with jurisdictions, period, amount, ledger account and agreement. The panel Is the analysis complete? counts functions, assets and risks, whether a benchmarking study is linked, and what is outstanding. The goods transaction is Complete: two functions, two assets, two risks, study linked, nothing outstanding.

    A sale or purchase of goods transaction in TaxOrch between Sample Distribution GmbH (sample) in DE and Sample Holdings Ltd in GB for €4,200,000.00, with the ledger account and signed distribution agreement, and a completeness panel reading Complete with functions, assets, risks and a linked studyA sale or purchase of goods transaction in TaxOrch between Sample Distribution GmbH (sample) in DE and Sample Holdings Ltd in GB for €4,200,000.00, with the ledger account and signed distribution agreement, and a completeness panel reading Complete with functions, assets, risks and a linked study

    One transaction: parties, period, amount, agreement, and the completeness panel.

  4. Complete the functions, assets and risks analysis

    Add function, asset or risk records each item, the entity that performs, owns or bears it, and the evidence that shows it (a trade mark register extract, a CRM export, an org chart, a distribution agreement clause). Each row carries a Reviewed badge once checked. The pricing method sits above: TNMM, with the reason (a limited-risk distributor with no product intangibles, so operating margin is tested against independent distributors) and the linked benchmark.

    The Functions, assets and risks table of a TaxOrch transfer pricing transaction listing trade marks, customer relationships, local sales, product design, market risk and inventory risk with the entity responsible and the evidence for each, all Reviewed, under a Pricing method panel naming TNMM with a linked benchmarkThe Functions, assets and risks table of a TaxOrch transfer pricing transaction listing trade marks, customer relationships, local sales, product design, market risk and inventory risk with the entity responsible and the evidence for each, all Reviewed, under a Pricing method panel naming TNMM with a linked benchmark

    FAR analysis: each function, asset and risk with who holds it and the evidence, all reviewed.

  5. Choose the method with its rationale and benchmark

    Which method suits a transaction is the analysis; naming one is the conclusion. Change method records the choice and its reason. The services transaction uses cost plus (routine support services, limited risk, no unique intangibles, costs fully recorded) and carries a No benchmarking study linked badge, so it stays Recorded rather than approved. TaxOrch does not include a benchmarking database; you link your own licensed study.

    A provision of services transaction in TaxOrch for €860,000.00 with a Pricing method panel naming cost plus method, a No benchmarking study linked badge, the reason for the method, and a reviewed functions, assets and risks tableA provision of services transaction in TaxOrch for €860,000.00 with a Pricing method panel naming cost plus method, a No benchmarking study linked badge, the reason for the method, and a reviewed functions, assets and risks table

    Cost plus with its rationale, and the honest badge: no benchmarking study linked yet.

Tips

  • Attach the evidence to each FAR row as you record it; a row without evidence blocks approval.
  • Record the reason for the method in a sentence a tax authority could read.

Limits

Try it on your own work

Try everything in the manual on your own work.

Ask for a demo account and work through these chapters with your own questions, or book a working session and check the file a reviewer would see.

Every screen in the manual was captured from the running product on sample data.

Decision support, not tax advice. A professional reviews before anything is filed.