Who needs to prepare Transfer Pricing Documentation in the United States?

In the United States, both U.S. and foreign companies may need to maintain transfer pricing documentation when engaging in transactions with related parties.

Transfer pricing documentation may be maintained by the following types of companies:

• S. companies that have transactions with related foreign companies, such as a foreign parent, subsidiary, or sister company.
• Foreign companies operating in the United States that have transactions with related companies, including U.S. subsidiaries or other related entities.
• Multinational groups with cross-border transactions involving goods, services, royalties, loans, intellectual property, or other payments between related companies.

Transfer pricing documentation is particularly important when a company has the following types of transactions:

• Significant related-party transactions, such as the purchase or sale of goods, management fees, royalties, or intercompany loans.
• Cross-border transactions between related U.S. and foreign companies.
• Transactions involving valuable intellectual property, such as patents, trademarks, technology, or software.
• Large or complex intercompany transactions that could significantly affect the amount of income reported in the United States.

The United States does not generally require a company to prepare transfer pricing documentation simply because it exceeds a specific revenue threshold. Instead, documentation is important because it helps demonstrate that related-party transactions were priced on an arm’s-length basis.

U.S. and foreign companies with significant related-party transactions should consider maintaining appropriate transfer pricing documentation, even when documentation is not specifically required for every transaction.

Next, let’s understand the key transfer pricing documentation requirements for U.S. companies and foreign companies operating in the United States.