As the financial year 2025–2026 draws to a close, businesses involved in cross-border transactions with group entities should review their transfer pricing position carefully. A year-end check helps confirm that transactions follow the arm’s length principle and that documentation and financial records are aligned.
This guide outlines 10 practical areas companies should review before closing the books for the year.
For companies that deal with overseas group entities, transfer pricing is not something that can be looked at only when the tax return is being prepared. In practice, most issues arise much earlier usually when the financial year closes and the numbers are already locked in.
The last few weeks of the financial year are therefore a good time for finance and tax teams to pause and ask a few basic questions. Are the margins in line with the transfer pricing policy? Are all intercompany transactions properly recorded? Do the agreements actually reflect what the company is doing in reality?
Many transfer pricing disputes start simply because these checks were not done at the right time.
A quick year-end review does not require a full transfer pricing study. However, it can help identify obvious gaps before they turn into adjustments, penalties, or long tax disputes later.
Below is a practical year-end transfer pricing checklist for FY 2025–2026 that businesses can use before finalizing their accounts.
Read This: Importance Of Transfer Pricing
The starting point is to list every transaction the company had with its related entities during the year.
These usually include:
It may sound obvious, but many companies discover during audits that certain intercompany charges were never properly recorded in the accounting system.
Before the books close, finance teams should confirm that the transactions in the accounting records match what was actually agreed between the entities.
Transfer pricing rules require related party transactions to follow the arm’s length principle, meaning that the price should be similar to what independent businesses would agree upon in comparable circumstances.
At year-end, companies should review whether the actual results for the year align with the benchmark ranges used in the transfer pricing policy.
If margins fall outside the acceptable range, it may be necessary to consider year-end adjustments. Identifying this before finalizing the financial statements makes the process much easier.
Transfer pricing documentation normally includes:
Even though documentation is usually finalized later, the information required for it must come from year-end financial data and operational details.
If records are incomplete or missing, preparing documentation later becomes difficult and may weaken the company’s position during audits.
Tax authorities often look closely at intercompany agreements during transfer pricing reviews.
These agreements should exist for common arrangements such as:
More importantly, the agreements should reflect the actual conduct of the parties. If the agreement says one entity performs a limited function but in reality it is making strategic decisions, the document may not hold up under scrutiny.
A quick review before the year closes can prevent such inconsistencies.
Most transfer pricing studies select one entity as the tested party, whose profitability is compared with similar independent companies.
Finance teams should review whether the tested entity’s profit margin for the year remains within the expected benchmark range.
If the margin is unusually high or low, it may indicate that the pricing policy was not followed consistently during the year.
Identifying this early allows companies to correct the situation before the books are finalized.
Service charges within multinational groups are frequently questioned by tax authorities.
Typical concerns include:
Companies should ensure that there is clear support for these payments, including agreements, invoices, and basic records showing the services performed.
Even simple supporting documents can make a significant difference during an audit.
Financial transactions between group companies are also subject to transfer pricing rules.
Key points to check include:
Interest rates should generally reflect market conditions. If the rate is significantly different from comparable loans, tax authorities may question the transaction.
Another practical step is to ensure that financial figures used for transfer pricing purposes match the company’s accounting records.
Differences between accounting data and transfer pricing documentation can raise unnecessary questions during assessments.
A basic reconciliation before finalizing financial statements helps avoid this issue.
Sometimes the financial results for the year may not fully reflect the transfer pricing policy.
In such situations, companies may consider year-end transfer pricing adjustments so that the final outcome aligns with arm’s length results.
However, adjustments should be supported with proper documentation and commercial justification.
Finally, companies should start preparing for the next phase of transfer pricing compliance, which includes:
Starting this process early reduces the risk of last-minute pressure or errors.
A short review before the financial year closes can prevent several common transfer pricing problems.
It allows businesses to:
In many cases, a simple review saves a significant amount of time and effort later.
Transfer pricing compliance is often viewed as a documentation exercise, but in reality it starts with making sure transactions are structured correctly from the beginning.
The closing weeks of the financial year provide a good opportunity to step back and review how intercompany transactions were handled during the year.
By checking key areas such as pricing, documentation, agreements, and financial results, companies can enter the next financial year with greater confidence that their transfer pricing position is consistent, defensible, and aligned with tax regulations.
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