What does contemporaneous documentation actually mean?
Records prepared by the time the return for the year is filed, rather than assembled once a question arrives. The word is about timing, not about content or quality. The same analysis, written to the same standard, either counts or does not count depending on when it was done, which is unusual in tax and is why the term exists at all. Documentation prepared after a query no longer satisfies the condition that protects against a penalty, even if every conclusion in it is right and supports the position taken in the return.
Can we prepare transfer-pricing documentation after a query arrives?
You can, and often should, because a written position is better than none. What you cannot do is make it contemporaneous. The penalty-protection condition turns on the records existing by the filing deadline, so preparing them afterwards means arguing the pricing on its merits without that protection. The practical consequence is the order of work: once a query is open, the effort goes into evidencing what the position was at the time, through decisions recorded, data used and agreements in force, rather than into producing a polished file with a current date on it.
Does contemporaneous mean written at the time of each transaction?
No. The test attaches to the filing deadline for the year rather than to the date of the individual dealing. What it does mean in practice is that the analysis has to reflect the information available when the arrangement was priced. A file completed before the return but built on data that only existed afterwards describes a decision nobody could have taken. So the sensible sequence is to price the arrangement when it is entered into, keep the workings, and complete the file for the year before the return goes in.
How do we prove our documentation was prepared on time?
By the trail around it rather than by the date on the cover. What carries weight is the vintage of the data used, because comparables drawn from a later publication cannot have been available earlier; dated drafts and version history; correspondence in which the analysis was discussed; management records approving the arrangement; and the agreements in force at the time. Assemble that as you go rather than looking for it later. A file with no surrounding trail can be perfectly good work and still be difficult to place in the year it belongs to.
We keep contracts and invoices, is that enough documentation?
Those are records of the transaction, not the analysis of it. Contemporaneous documentation means the reasoning existed in time: what the entity does and which risks it carries, why a method was chosen, what it was tested against, and what the result was. Invoices show that a price was charged; they say nothing about why that price is the one independent parties would have agreed. Groups tend to discover the distinction at the worst moment, having kept every document about the dealing and none about the pricing of it.
Is late documentation worth preparing if penalty protection is gone?
Usually yes, because the issues are separate. Penalty protection turns on timing and cannot be recovered. The pricing itself is still argued on the facts, and a written analysis covering functions, method, comparables and results is how it gets argued. What changes is the weight it carries: a position first written down after a question has been asked is read as a response, while the same position written beforehand is read as the basis on which the return was filed. So prepare it, and be straightforward about when it was prepared.
What is a double tax treaty and what does it actually do?
It is an agreement between two countries that divides up the right to tax. Article by article it decides which country taxes employment income, dividends, interest, royalties, pensions, property and business profits — and where both may tax, it caps what the source country can withhold and tells the other to give credit. It also breaks residence ties and opens a government-to-government channel for disputes. What it never does is apply itself: a treaty position is claimed. See our treaty work.
Can an accountant in one country file my return in another?
Yes, where they are authorised to represent you with that tax authority and the filing is done electronically. What matters is not where the adviser sits but whether they can lawfully act for you and are competent in both systems — a return prepared with no knowledge of the other country is where the relief gets missed. We file on both sides, from offices in India, the USA, Canada and the UAE. See how we work.
