Transfer Pricing

Country Studies

Country Studies

NERA has broad expertise in fulfilling the transfer pricing compliance requirements for large and middle-market companies in a variety of industries. Our transfer pricing practitioners are recognized as leading experts in the field, using best practices tailored to local country regulations.

United States

Section 482 of the Internal Revenue Code authorizes the IRS to adjust the income, deductions, credits, or allowances of commonly controlled taxpayers to reflect their income in accordance with the arm’s length standard. The US Treasury Regulations under Section 482 apply to transfers of goods, services, intangibles, and financial transactions among controlled taxpayers.

Should the IRS determine that an income adjustment related to a taxpayer’s transfer pricing is necessary, the taxpayer may be subject to additional penalties under a separate statute (Section 6662) unless they can provide the IRS with transfer pricing documentation that meets the requirements of Section 6662 within 30 days of the date of request. In order to meet the requirements of Section 6662, documentation prepared by taxpayers must be in existence at the time the annual tax returns are filed.

Although Section 482 regulations apply directly only for federal tax purposes, state tax authorities in the US often invoke these regulations in audit cases related to transfer pricing of interstate transactions.

The US transfer pricing compliance regime is one of the most challenging in the world. It is characterized by complex and frequently amended regulations and aggressive enforcement by tax authorities. NERA compliance experts help clients apply leading-edge methodologies in response to these challenges.


In fall 2009, the French government promulgated legislation (Article L. 13 AA of the French Tax Procedure Code, or FTPC) that requires French MNCs and French subsidiaries of foreign MNCs to prepare transfer pricing documentation to be provided to tax authorities in cases of audit.
The documentation requirements apply to French companies that:

i. have an annual turnover or a net equity in excess of €400 million;

ii. own directly or indirectly, or are owned directly or indirectly by a company that meets  criterion (i); or

iii. are members of a tax consolidation ("intégration fiscale") or a worldwide tax consolidation ("benefice mondial consolidé") group that on a consolidated basis meets criterion (i).

The content of the documentation described in the law refers to two types of transfer pricing documentation, in line with the EU masterfile concept:

i. General information on associated companies, consisting of:

  • the activity and business strategy of the group;
  • the legal and organizational structure;
  • the functional analysis;
  • the list of intangible assets related to the audited company’s business; and
  • a general overview of the transfer pricing policy of the associated group.

ii. Specific information on the audited company itself, such as:

  • activities and business strategy;
  • information on transaction carried out with related parties;
  • APAs and cost-sharing agreements;
  • comparable and functional analysis;
  • an explanation of the selection and application of the transfer pricing method(s); and
  • comparables data used for such method(s). 


On 1 April 2010, the 2010 Tax Reform Act passed by the Upper House of Japan's parliament went into effect. The Act covers a range of issues, including transfer pricing documentation requirements as described in an accompanying Order by the Ministry of Finance. The new transfer pricing rules are geared towards increasing the efficiency of tax administration and define the type and the scope of documentation and supporting analyses to be made available by the taxpayer at the onset of a transfer pricing audit. The two broad categories of documentation described in the Finance Ministry Order are (i) documentation related to the transactions with foreign related parties and (ii) documentation concerning the methods for determining arm’s length prices and their rationale.

The fundamental objective of the change to the Act and the accompanying Order is to streamline the audit process and reduce the administrative burden by minimizing the room for divergence of opinions on what constitutes the scope of information "required" for the audit. This does not necessarily mean, however, that preparation of the transfer pricing documentation has been made easier for taxpayers, as the Order contains some controversial provisions such as availability of profit and loss statements for both sides of transactions with foreign related parties.

The changes introduced by the Act prompt taxpayers to prepare a description of their intercompany pricing in accordance with transfer pricing regulations, and demonstrate consistency of these policies among different tax jurisdictions and across business lines.

Therefore, in order to deal effectively with the increased risk of transfer pricing audits, companies operating in Japan should focus their transfer pricing efforts on unifying intercompany pricing policies among different countries, affiliates, and lines of business, monitoring compliance with these policies, and collecting and retaining information that demonstrates compliance.


Despite China's relatively short history of transfer pricing legislation, China is among the countries whose tax authorities are most aggressively engaged in transfer pricing audits. Companies unable to demonstrate that their related-party transactions comply with the arm’s length principle are subject to tax adjustments and interest payments. Enhanced scrutiny presents MNCs with significant tax risks when they invest in China.

Recent regulatory developments in China—particularly the new Corporate Income Tax Law, its implementation rules, and the Implementation Measures for Special Tax Adjustments—set strict transfer pricing compliance standards.

i. Companies meeting either of the following criteria are obliged to prepare the contemporaneous transfer pricing documentation and submit it within 20 days upon request:

  • Companies whose related-party transactions of tangible goods reach RMB 200 million per year.
  • Companies whose related-party transactions other than tangible goods transactions reach RMB 40 million per year.

ii. Companies are required to disclose related-party transactions in nine reporting forms by 31 May, together with their annual corporate income tax return filing.

iii. Chinese affiliates of multinational companies engaged in simple production, distribution, contract research and development, or other limited functions shall maintain reasonable profit levels. Such companies with operating losses are required to file the documentation by 20 June, regardless of whether it reaches the above transaction threshold.

In the documentation, taxpayers are required to include detailed information regarding business operations, related-party transactions, transfer pricing testing methods, and benchmarking analysis. Companies that fail to comply with documentation requirements are more likely to become targets of tax audits.

NERA transfer pricing experts in China have extensive experience in aiding MNCs with transfer pricing compliance. NERA has established relationships with state and local tax authorities in China, developed through numerous transfer pricing audits. With in-depth knowledge of the tax authorities’ expectations, NERA has successfully assisted MNCs with planning and documenting their intercompany pricing policies. 

Using rigorous economic analysis, NERA’s team in China provides assistance in pricing policy design, transfer pricing risk assessments, contemporaneous documentation preparation, audit defense support, mutual agreement processes, and advanced pricing arrangements (APAs).

Name Title Location Phone Email
Dr. Yves Hervé Senior Managing Director Frankfurt +49 69 710 447 508
Dr. Harlow Higinbotham Senior Managing Director Chicago +1 312 573 2803
Dr. Emmanuel Llinares Senior Managing Director
Head of Global Transfer Pricing
+33 1 70 75 01 93
+41 79 517 6895
+44 20 7659 8650
Philip de Homont Managing Director Frankfurt +49 69 710 447 502
Tom Braukmann Director Frankfurt +49 69 710 447 511
Alexis Jin Consultant Chicago +1 312 573 4804
Dr. Alexander Voegele Affiliated Consultant Frankfurt +49 69 710 447 501
Title Type Author
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