The legal form, meaning the contract between related parties and its provisions, has always been among the factors that come into play when assessing whether prices applied in controlled transactions are arm’s length. This article discusses why the legal form of a transaction is important, looks at a common approach to preparing intragroup contracts, and explores some rules that should be followed when drafting those contracts to mitigate transfer pricing risks.

Section 15.2 of the Taxes and Duties Act requires a taxpayer to meet requirements for the timeliness of information included in their transfer pricing (“TP”) documentation and for regular updates to reflect the present situation. During a period of calm in preparing and filing TP documentation, we asked the State Revenue Service (“SRS”) to answer some confusing questions about updating comparable data and revising financial data, including the scope for taking the roll forward approach.

When doing a transfer pricing analysis of financial transactions, we need to assess the borrower’s creditworthiness before setting an interest rate. To evaluate the risk associated with an intragroup financial transaction and determine an arm’s length interest rate for taking credit risk, the lender should evaluate the likelihood of the borrower defaulting, i.e. creditworthiness, and the probability of recovering the loan. This article explores a credit rating model that multinational enterprises often create to determine the creditworthiness of particular units.