The latest transfer pricing updates on Europe, Asia and America

This article identifies the different types of documentation requirements in three macro-areas (i.e., Pan Europe, Asia-Pacific and America) and it explains the thresholds used for the different taxpayers’ obligations. In addition, it provides an overview of the administrative penalties imposed.

The countries analysed in the article are the following:

  • Pan European: France, Germany, Hungary, the Netherlands, Romania, Italy, Spain and the UK.
  • Asia-Pacific: Australia, China, India, Japan, Singapore.
  • America: Canada, Central America and the Caribbean, Chile, Mexico and the USA.

Appropriate Transfer Pricing Documentation

Several European and non-European countries have already implemented their local regulations on Transfer Pricing Documentation according to BEPS Action 13[1] which has introduced a standardized approach (the so-called three-tiered approach) consisting in the preparation of a Local File, a Master File, and Country-by-Country Reporting (CBCR). In relation to the latter, all countries analyzed in the article have implemented CBC reporting, however, penalties for failure to submit proper information in the due time, differ from country to country.

As of today, most Pan European countries have aligned their set of transfer pricing documentation requirements to that recommended by the OECD, however, content, threshold, notification, and submission deadlines differ from country to country.

In Italy, recent Measures have made it mandatory for companies that intend to benefit from penalty protection to prepare a Master File and a Local File. In relation to the latter, the documentation must comply with a rigidly structured scheme. On the other hand, for the preparation of the Master File the structure suggested by the OECD is also accepted.

In the UK, transfer pricing documentation does not take any specific prescribed form, but taxpayers must keep documentation that demonstrates the required arm’s length standard has been met. It is however recognized as best practice to prepare a Local File and Master File according to the OECD standards.

In China, in addition to the Master File and Local File a Special File disclosing information related to the Chinese taxpayer’s intragroup cost sharing agreements and thin capitalization is required to be submitted upon request, within 30 days to the local Tax Authority.

In the USA, although transfer pricing documentation is not required by law, it is recommended that taxpayers maintain contemporaneous documentation to avoid penalties. For the transfer pricing documentation to be considered complete, it must include ten main reports.


In Italy, there are no materiality limits or thresholds since there is no obligation for taxpayers to maintain proper transfer pricing documentation (unless the taxpayer intends to benefit from the penalty protection regime).

Differently, various thresholds exist in other analyzed countries. In Hungary, the transfer pricing documentation (Master File and Local File), must be prepared for transactions that exceed HUF 50 million (ca. 140,000 euro).

In Singapore, full-fledged transfer pricing documentation is required to be prepared and maintained by all companies that meet two conditions as are explained in the article.

In Mexico, taxpayers are obliged to prepare the Local File and the Master File if the Mexican entity exceeds taxable revenues above USD$ 35 million (ca. 29 million euro), differently in the USA there is no materiality threshold applicable to the transfer pricing documentation requirements.


This paragraph focuses on the administrative penalties imposed for failure to comply with documentation requirements or late submission and adjustments related penalties.

In Italy, proper transfer pricing documentation compliant with local regulations and indications provided by the Italian Tax Authority, allows taxpayers to benefit from the non-application of penalties for “unfaithful” filing of the tax return in the event of a tax audit on transfer pricing issues (so-called penalty protection). The penalty ranges from 90% to 180% of the assessed tax.

Differently, various penalties exist in other analyzed countries. In France, in the case of a failure to submit, or a late submission or incorrect disclosures, penalties specific to the failure to comply with the transfer pricing documentation requirements apply in addition to the tax penalties generally applied as a consequence of a TP reassessment differently in the Netherlands non-compliance with mandatory transfer pricing documentation requirements is a criminal offence and penalties can be imposed up to detention for a maximum of 6 months or a fine up to 8,700 euro.

In India, a penalty equal to 2% of the value of each intercompany transactions is imposed if the taxpayer fails to maintain the transfer pricing documentation, to report a transaction, or to maintain incorrect information or documents.

In Mexico, failure to comply entirely with the Master File and Local File requirements triggers penalties ranging from MXN154,800 to MXN 220,400 (ca. 6,000 to 9,000 euro), with the disqualification from entering into agreements with the Mexican Tax Authority, and cancellation from the importers’ and exporters’ registry.

[1] 2015 Final Report – transfer pricing documentation and Country-by-Country Reporting. Key elements of the Action 13 Final Report have also been incorporated into Chapter 5 of the OECD Transfer Pricing Guidelines (July 2017).