handbook-tb

Diane Ring(c) Controlled transactions: The third category pertains toinformation regarding controlled transactions involvingthe local entity. A more specific list of information is enumeratedhere, which goes to the core of how the taxpayerapplies the transfer pricing rules:‣ ¾ Description of the transactions (for example, services,purchase of goods, loans) and the context in which thattransaction took place (for example, business activity,financial activity, cost contribution arrangement);‣ ¾ Aggregate charges for each category of transaction;‣ ¾ Identity of the related parties involved and the nature oftheir relationships;‣ ¾ Functional analysis of the taxpayer and the related entitiesregarding each category of controlled transactions(functions performed, assets used, assets contributed,intangibles involved, risks borne and changes comparedto prior years);‣ ¾ Identification and description of controlled-party transactionsthat might impact the transaction in question;‣ ¾ Specification of the most appropriate transfer pricingmethod by category, the reasoning for the selection,which entity is the tested party (where relevant) andwhy, and assumptions made in using the method;‣ ¾ If using a multi-year analysis, include an explanationwhy;‣ ¾ Information regarding comparables — how selected,search strategy, application of method, and relevantfinancial indicators used in the analysis;‣ ¾ Any adjustments to comparables, to the tested party;‣ ¾ Conclusions regarding the arm’s length status ofrelated-party transactions based on application of theselected method.3.3.4 Implementation issues under Action 13Documentation and burden: Taxpayers are expected to price at arm’slength based on contemporaneous information, and prior to engaging in516