We only have one intercompany invoice — do we still need documentation?
In principle the obligation attaches to the transaction, not to the size of the group. A group with three entities and one intercompany invoice has the same transfer-pricing obligations as a multinational, and a fraction of the budget to meet them. That is an argument for proportion, not for doing nothing. One invoice means one transaction to analyse, one method to document and one reconciliation to the accounts — a short file that can actually be defended, rather than an absence that has to be explained after the questions start.
How small is too small to need a transfer-pricing file?
Size is the wrong test to reach for first. What matters is whether related parties transacted with each other, and whether those transactions move profit between countries. A small group with a single management charge crossing a border has something to document; a larger group with no cross-border dealings may have very little. The right question is which transactions actually shift where profit lands. Answer that, and the scale of the file follows from the answer instead of from the size of the business.
Can I write my own transfer-pricing file for a small group?
Parts of it, and the parts you can write are the valuable ones. Nobody knows better than the owner who does what, who carries which risk and who decides prices, and that functional analysis is the backbone of the file. Where outside help earns its keep is in choosing and documenting a single method, testing it, and making sure the numbers reconcile to the statutory accounts. A file written honestly by the business and tested by an adviser beats a thick report the business cannot explain.
What should a proportionate transfer-pricing file actually contain?
A description of the group and who does what in it, the intercompany transactions that matter, an honest functional and risk analysis, one clearly reasoned method with the reasons stated, and a reconciliation from the tested result back to the accounts. That is the whole shape of it. A proportionate file focuses on the transactions that actually move profit and uses a single well-documented method. Doing that well beats a long report nobody can tie to the ledgers, which is the usual complaint about inherited documentation.
Is a management fee between my two companies a transfer-pricing issue?
If the two companies sit in different countries, yes. A management charge is an intercompany transaction like any other, and the first questions are the ordinary ones: what was actually provided, by whom, and what would an independent party have paid for it. In practice the weak point is rarely the rate. It is evidence that the service was delivered at all — time records, correspondence, a contract signed before the work rather than after — which is what an enquiry asks for first.
Do I need a new study every year or can I update the old one?
A file describes one year's facts, so the real question is whether the facts moved. If functions, contracts, risks and the shape of the business are unchanged, the update is short and mostly numerical: refresh the financial data and the reconciliation. If a function moved between entities, a new transaction appeared or the group entered another country, none of the old analysis carries over automatically. The useful discipline is reviewing the functional analysis each year before deciding which of the two situations you are in.
What is a permanent establishment, and how easily do we create one?
A taxable presence in another country under the treaty — typically a fixed place of business such as an office, branch, factory or workshop, or a dependent agent habitually concluding contracts on your behalf. Some treaties add a services test measured in days. Purely preparatory or auxiliary activity is excluded, but that carve-out is narrower than it sounds: one senior employee working from home in the other country, with authority, has been enough. See business profits and permanent establishment.
What is double tax relief and how is it given?
Three mechanisms, and which one you get depends on your residence country's law and the treaty. Exemption leaves the foreign income out of the residence-country base. Credit taxes it and then subtracts the foreign tax, capped at the residence-country tax on that income. Deduction merely reduces taxable income by the foreign tax, and is usually the weakest. Canada and the United States lead with credit; several treaties give exemption for specific income types. See claiming the credit.
