Draft Transfer Pricing Documentation

---
name: draft-transfer-pricing-documentation
task_id: tax/draft-transfer-pricing-documentation
description: A transfer pricing documentation review memorandum must assess a multinational documentation package against the applicable transfer pricing documentation framework, analyze entity substance and DEMPE functions, identify local compliance deadlines as urgent action items, and produce both a risk quantification table and an action item matrix.
activates_for: [planner, solver, checker]
---

# Skill: Draft Transfer Pricing Documentation Review Memorandum

## 1. Subject-matter triage

- Determine first whether the package contains a group overview, jurisdictional local files, and any country-by-country element that is relevant to the group.
- Identify all jurisdictions, entities, intercompany agreements, benchmarking reports, valuation materials, treasury papers, and filing instructions before analyzing adequacy.
- If only one entity, one jurisdiction, or one transaction type is actually in scope, state that expressly and analyze it as such; do not imply broader coverage.

## 2. Failure modes the skill is correcting

- Identifying documentation gaps without separating critical compliance defects from items that can be remediated on a normal cycle.
- Missing local-file language, certification, or filing requirements where a jurisdiction imposes them, including deadlines tied to the return cycle.
- Reviewing agreements without testing the pricing terms, amortization periods, and valuation support against each other for consistency.
- Describing risk without assigning an ordinal severity, a quantified exposure band, and a downstream consequence.
- Producing a narrative review without a risk table, compliance calendar, and action matrix.
- Failing to convert identified issues into concrete remedial steps with a responsible role and timing anchor.

## 3. Legal frameworks / domain conventions that apply

- Apply the relevant transfer pricing documentation framework for the group, including a group-level file, local files by jurisdiction, and any country-by-country reporting component where applicable.
- Evaluate intangible ownership and residual return allocation through the DEMPE lens: development, enhancement, maintenance, protection, and exploitation must be mapped to actual personnel, decision-making authority, and control of risk.
- Test intercompany pricing against arm’s-length principles under the applicable transfer pricing regime and the benchmarking study used in the package.
- Check local filing, language, and certification requirements under the relevant domestic transfer pricing rules and tax-return calendar for each jurisdiction.
- For cost sharing, buy-in, or other pre-existing intangible valuation support, reconcile the legal and accounting amortization treatment to the valuation methodology and stated useful life.
- For royalty arrangements, assess the comparables set, whether non-comparable licenses distort the range, and whether the applied rate remains defensible after filtering.
- For treasury structures, evaluate spread adequacy and capitalization sufficiency together; thin capitalization can undermine both deduction support and return adequacy.

## 4. Analytical scaffolds

1. **Document inventory and completeness check**
   - List each document type, entity, and jurisdiction.
   - Identify missing, stale, inconsistent, or unsigned materials.
   - Note any language, certification, or filing defects.

2. **Entity-by-entity substance and DEMPE review**
   - Identify the functions performed by each relevant entity.
   - Test whether personnel, control, and risk-bearing align with the claimed return.
   - State whether the residual IP return allocation is defensible and why.

3. **Intercompany agreement consistency review**
   - Compare contractual pricing, term, amortization, and payment mechanics against operational records and supporting studies.
   - Flag inconsistencies between stated terms and observed practice.
   - Cross-reference related agreements or schedules that affect the same transaction.

4. **Jurisdictional local-file review**
   - For each jurisdiction, confirm language, format, sign-off, and deadline requirements.
   - Distinguish imminent filings from later-cycle items.
   - Treat pending audits or information requests as background pressure only; they do not extend statutory deadlines.

5. **Valuation and royalty support review**
   - Test buy-in or similar valuation support for consistency with the contractual treatment.
   - Assess the royalty benchmark set, comparable selection, and range sensitivity to questionable comparables.
   - State the consequence if the applied rate falls outside or near the edge of the range.

6. **Treasury and financing review**
   - Evaluate spread between funding cost and lending rate.
   - Assess capitalization and funding structure together.
   - Identify whether the structure creates pricing, deduction, or substance concerns.

7. **Issue-level closure discipline**
   - For each issue, include: severity, quantified scale or threshold, cross-reference to the interacting document or clause, and downstream consequence.
   - Avoid standalone observations that do not end in a conclusion and remedial path.

8. **Risk quantification table**
   - Include every issue in a table with severity and exposure band.
   - Use consistent bands such as low, medium, and high, with a short rationale for each.

9. **Action item matrix**
   - Translate each issue into one or more actions.
   - Assign a responsible role and a timing anchor.
   - Make urgent filing items explicit and separate from broader cleanup work.

## 5. Vertical / structural / temporal relationships

- Track relationships between master file statements and local-file positions so that group-level descriptions do not conflict with country-specific facts.
- Track relationships between agreement terms and implementation records, especially pricing, amortization, payment timing, and invoicing.
- Track relationships between valuation assumptions and accounting treatment, particularly useful life, method, and start date.
- Track relationships between filing deadlines, return due dates, and any local language or certification requirements.
- Where multiple jurisdictions are involved, enumerate them explicitly and analyze each one separately rather than collapsing them into a single regional assessment.

## 6. Output structure conventions

- Begin with a short executive summary stating overall documentation quality, principal risks, and the most urgent remediation items.
- Follow with issue-by-issue findings, each using a uniform severity label such as Critical, High, Medium, or Low.
- For each issue, state the document or provision implicated, the governing transfer pricing principle or domestic compliance rule, the quantified exposure or scale, and the practical consequence.
- Include a separate risk quantification table with all issues and their exposure bands.
- Include a separate compliance calendar for imminent local-file, certification, and return-linked deadlines.
- Include a separate action matrix with issue, priority, responsible role, and deadline.
- End with a Recommended Actions section that uses imperative verbs and specifies who must do what by when.
- Use conventional memorandum formatting; do not imitate a rubric checklist or expose hidden scoring categories.