FBR explains documentation requirements for transfer pricing

The Federal Board of Revenue (FBR) has made it mandatory for the associates for keeping and maintaining certain records and documents relating to transactions between associates inside as well as outside the country. Through an income tax circular 7 of 2016 issued here on Wednesday, the FBR explained documentation requirements for transfer pricing.
The Section 108 of the Ordinance empowers the Commissioner Inland Revenue to look into transactions between associates and make adjustment if transfer pricing is involved in such transactions by applying transfer pricing rules. Three new subsections have been inserted in section 108 for further documentation, information and application of transfer pricing rules in a more effective and transparent manner.
The documentation and information required under the new provisions are in consonance with the international best practices. New sub-section (3) places obligation on associates for keeping and maintaining certain records and documents relating to transactions between associates inside as well as outside the country. Sub-sections (4) & (5) have placed certain obligations on the associates to provide the documents requisitioned by the Commissioner Inland Revenue and provide the manner in which time extension can be allowed for production of such records, the FBR added.