Before closing the books, every company should review what information is recorded in their accounting and what requires special attention. This matters because after the year-end date, certain decisions can no longer be made.
If your company belongs to an international group and conducts transactions with related parties, it is especially important to check: Do the applied prices comply with the arm’s length principle? If not, a transfer pricing adjustment is needed – and it’s best to do this before closing the books.
Why is this important now?
Transfer pricing adjustments affect corporate income tax, local business tax, and other tax types. If the correction is made in time, future issues can be avoided, and in many cases, a more favorable tax impact can be achieved. Year-end databases have already been updated, so the arm’s length price can be determined accurately.
What does the law require?
According to the Corporate Income Tax Act, taxpayers must adjust their tax base if the applied price does not comply with the arm’s length principle. This applies to all related-party transactions, not only those requiring transfer pricing documentation. The adjustment is usually made to the median value of the arm’s length range.
How does this appear in accounting?
The adjustment can be made in two ways:
- Accounting adjustment: The parties actually settle the difference between themselves. This can be done by invoice modification or issuing an accounting document.
- Tax base adjustment: If there is no accounting settlement, the corporate tax base must be corrected. In this case, the transaction amount does not change, only the tax base.
Why act in time?
If the decision is made before closing the books, the adjustment is easier to handle, and later administrative burdens can be avoided.
How can we help?
Year-end closing is not only about legal compliance but also about ensuring that all data is accurate and the accounting reflects real economic events. We can support you in this: with over 20 years of experience, international background, and up-to-date expertise, we ensure that transfer pricing adjustments are correctly recorded.
Summary:
Transfer pricing adjustment is not only a legal obligation but also an accounting task that must be carried out timely and professionally. If you want everything to be in order at year-end closing, contact us with confidence.
Get in touch – we ensure accurate and compliant accounting!
