Transfer pricing: Documentation requirements for international groups

What documentation do I need to provide?

In most countries, groups of a certain size are required to maintain documentation of all intercompany transactions. The specific requirements vary from country to country, but the documentation typically includes:

• A Master File: Explains the group structure, intercompany transactions and transfer pricing methods used.

• A local file: details the intercompany transactions involving the local group entity.

• A country-by-country report (CbCR): Mandatory for large groups with consolidated revenues exceeding €750 million.

What are the thresholds for the documentation requirements?

For Belgian group companies, the documentation requirements depend on the individual financial statements of the last closed financial year. Transfer pricing documentation is always required if one or more of the following thresholds are exceeded:

• Turnover exceeds €50 million.

• The average number of employees exceeds 100 FTEs.

• Total balance sheet exceeds €1 billion.

Note that the thresholds vary from country to country. In many cases, the criteria are assessed on a consolidated basis. For example, a group may not meet the documentation thresholds in Belgium (if the turnover of the Belgian entity is below €50 million), but the obligation may apply in another country if the group exceeds the threshold on a consolidated basis.

Example: a group has a Belgian parent company with a turnover of €40 million and a Dutch subsidiary with a turnover of €20 million. In the Netherlands, documentation is required if the consolidated turnover exceeds €50 million. In this case, the group must prepare a master file and a local file in the Netherlands, but not in Belgium.

In addition, some countries have different thresholds for local and master file requirements. Within the EU, Poland, for example, has particularly strict documentation rules.

Example: in Poland, a local file is required if the turnover of the Polish company exceeds 10 million Polish zlotys (approximately €2 million). If the turnover exceeds €10 million, benchmarking of all intercompany transactions is mandatory. A Master File is required if the turnover exceeds €20 million.

How do I submit documentation?

The submission process varies from country to country. Transfer pricing documentation is often attached to tax returns, but may also need to be submitted separately at a later date. For example, in Belgium, the local file must be filed with the corporate tax return. The Master File must be submitted no later than one year after the end of the financial year to which it relates.

Do you operate in several countries? If your business operates in more than one country, it's important to understand the different thresholds and calculation methods for transfer pricing documentation. In many countries, failure to provide documentation on time can result in penalties or a reversal of the burden of proof.