# Transfer Pricing Basics

> Understand transfer pricing basics for intercompany transactions — arm’s length principle, methods, and documentation needs — to manage cross-border tax risk. Use when setting intercompany pricing, expanding internationally, or preparing TP documentation with advisors.

- Skill: `itsual/transfer-pricing-basics` (Agent Skill)
- Install (CLI): `npx skillmds@latest add itsual/transfer-pricing-basics`
- Raw SKILL.md: https://api.skillmd.com/api/skills/itsual/transfer-pricing-basics/raw
- Safety review: pending
- Works with: Claude Code, Claude.ai, OpenAI Codex
- Category: Docs & Writing
- Author: itsual (https://skillmd.com/u/itsual)
- Updated: 2026-09-21
- Page: https://skillmd.com/skills/itsual/transfer-pricing-basics

---


# Transfer Pricing Basics

## Overview

Transfer pricing governs how related entities price intercompany transactions. Tax authorities scrutinize whether prices reflect arm’s length dealing.

## When to Use

- Cross-border intercompany services, goods, or IP
- New entity or principal structure setup
- TP policy and documentation cycles
- Audit inquiries on intercompany margins

## Core Concepts

- Arm’s length principle
- Common methods (CUP, resale minus, cost plus, TNMM, profit split)
- Functional analysis (functions, assets, risks)
- Documentation and contemporaneous support

## Principles

- Pricing should follow substance of where value is created
- Paper without operational reality is fragile
- Specialist advice is essential for material structures
- Consistency year to year reduces challenge risk

## Verification

- [ ] Intercompany transactions are inventoried
- [ ] Policy exists for material flows
- [ ] Documentation timeline is owned