Functions, assets and risk analysis in the preparation of transfer pricing documentation

Abstract

The topicality of scientific and applied research, which was aimed at developing and improving methods of tax administration of transfer pricing, is the relative novelty of the active use of this tool. It is worth noting that almost all elements of the mechanism for determining the value of the transaction, the operations of which are recognized as controlled, including the procedures for conducting functional analysis for the preparation of transfer pricing documentation. This allowed stating the aim of the publication, which is to identify the features of functional analysis to justify the choice of the comparative side of the controlled operation in Ukraine, as well as the method of ensuring compliance with the arm's length principle and organisation of the reporting process. The organisational and legal support of the functional analysis for the purposes of transfer pricing and the use of its results in the preparation of transfer pricing reports were studied. The study revealed incomplete organisational and legal conditions for preparing a transfer pricing report in Ukraine, in particular, difficulties in obtaining information for comparisons, as well as the lack of a unified methodology for functional analysis to reveal the economic nature of the transaction, which is considered controlled for transfer pricing purposes. Based on a positive and regulatory analysis of the processes of forming the market value of the transaction for tax purposes, the author's vision of the methodological approaches to functional analysis in Ukraine, presented in the Practical Manual on Transfer Pricing for Developing Countries 2021, was proposed.