On 22 October 2026, the NTBT released a clarification on the requirements for profit-seeking enterprises applying for a one-time transfer pricing adjustment under Article 111 of the Income Tax Act. The Bureau emphasized three mandatory conditions: (1) the adjustment must comply with the arm’s length principle; (2) taxpayers must possess contemporaneous transfer pricing documentation; (3) the adjustment must result in a reasonable allocation of profits between related parties. The guidance aims to prevent arbitrary adjustments that erode the tax base.
Key Takeaways
- Arm’s Length Compliance: Any one-time adjustment must reflect pricing that independent enterprises would have agreed upon under comparable circumstances, supported by reliable comparability analysis.
- Documentation Prerequisite: Taxpayers must maintain contemporaneous transfer pricing reports prepared before the filing deadline; post-hoc documentation is insufficient.
- Profit Allocation Reasonableness: The adjustment must not merely shift profits to low-tax affiliates but must align with the functions, assets, and risks (FAR) of each entity involved.
Disclaimer: This article is compiled and summarized by the AI based on publicly available information and is for general information purposes only. It does not constitute any form of formal tax advice, legal opinion, or basis for performance. Please consult a qualified professional tax advisor or legal counsel for tax advice.
Source: Read Official Announcement