A documentation is deemed "contemporaneous" if it is prepared:
- at the point when the taxpayer is developing or implementing any arrangement or transfer pricing policy with its associated person; or
- if there are material changes when reviewing these arrangements prior to preparing the relevant tax return of his income for the basis year for a year of assessment.
Material changes are significant changes that would give impact to the functional analysis or transfer pricing analysis of the tested party. Material changes include changes to the operational and economic conditions that will significantly affect the controlled transactions under consideration. Examples of changes in operational conditions include the following:
- changes in shareholding;
- changes in business model and structure;
- changes in business activities (e.g. changes in group business activities that give impact to local business activities);
- changes in financial/financing structure;
- changes in TP policy; or
- merger & acquisition.
Examples of changes in economic conditions include the following:
- foreign exchange;
- economic downturn; or
- natural disaster.
In preparing the documentation, the arm's length transfer price must be determined before pricing is established based upon the most current reliable data that is reasonably available at the time of determination. However, taxpayers should review the price based on data available at the end of the relevant year of assessment and update the documentation accordingly.