Tax Talk: Beyond Transfer Pricing Documentation

We asked four of our Transfer Pricing leaders — Mimi Song, Mili Diaz Colodrero, Marjored Perez, and Laksha Nahar to share the regulatory and compliance shifts that, in their experience, most companies are not yet watching closely enough. Their answers converged on a single theme: the era of treating transfer pricing as a paperwork exercise is over. 

Data as Proof  

Mili: The industry has shifted from “documentation-as-compliance” to “data-as-proof.” Tax authorities are no longer just reading our reports — they are using AI-driven analytics to interrogate raw financial data directly, performing algorithmic cross-checks between our narratives and actual ERP logs or intercompany transaction flows. A perfectly written report is useless if the digital breadcrumbs in the ERP system don’t back it up. 

We are seeing a clear move toward automated audit triggers, where algorithms flag logical mismatches between business conduct and financial outcomes. For multinationals, transfer pricing is no longer a paperwork exercise — it is a data architecture challenge. 

Marjored: That speed of enforcement is where most companies are dangerously exposed. Tax authorities across Europe and Latin America are already using AI and digital tools to cross-reference intercompany invoices against Master File data in near real time, flagging inconsistencies months before an annual return is even filed. Meanwhile, most companies cannot produce segmented P&Ls or a clean documentary trail across their global entities. That data fragmentation triggers a presumption of inaccuracy in many jurisdictions, exposing companies to non-deductible penalties. The bottom line: reconstructing years of evidence under audit pressure costs roughly five times more than building a proactive data strategy upfront. 

Substance Over Documentation 

Laksha: Substance is where companies continue to fall short. Too many still focus heavily on pricing and benchmarking while neglecting the economic substance of their transactions. Functional analyses are often weak, and transfer pricing policies don’t reflect how the business actually operates. 

The shift toward substance is no longer theoretical — it is actively enforced. Yet many companies still react only when challenged, which is precisely the wrong time to start building the evidentiary record. 

Marjored: That reactive posture is the single biggest shift companies are underestimating. For years, most multinationals treated transfer pricing as a documentation exercise — produce the reports, run the benchmarks, and file on time. Tax authorities worldwide now expect intercompany pricing to reflect how the business actually operates, and they have the tools to verify it. Companies that haven’t adapted their processes to this standard are sitting at significant risk without realizing it. 

Substance Over Form  

Mimi: Many companies are still consumed by form requirements — local filings, notifications, and formulaic calculations such as those under Pillar Two. Important as those are, they aren’t seeing the forest through the trees. The substance of the intercompany relationships, and the proper characterization and delineation of those transactions, is what ultimately supports arm’s-length pricing. Without that foundation, no amount of procedural compliance will hold up under scrutiny. 

Operational Reality Is the New Compliance  

Marjored: Beyond data and substance, the specific 2026 regulatory landscape has created blind spots that many tax functions have not fully absorbed. 

Pillar Two is a perfect example. The U.S. was recognized as a qualifying jurisdiction in January 2026, which means U.S.-headquartered groups won’t face top-up taxes under the Income Inclusion Rule (IIR) or the Undertaxed Profits Rule (UTPR). Many companies have treated this as mission accomplished. But the GloBE Information Return (GIR), the standardized filing required under the Global Anti-Base Erosion (GloBE) rules, still demands granular, entity-level data that most legacy systems cannot produce. If a tax authority successfully challenges the transfer pricing of even one entity, the entire global tax position can collapse. 

At the same time, the One Big Beautiful Bill Act (OBBBA) eliminated the Qualified Business Asset Investment (QBAI) exclusion for both Net CFC Tested Income (NCTI, formerly GILTI) and Foreign-Derived Deduction-Eligible Income (FDDEI, formerly FDII). This stripped away the asset-based shield that capital-intensive subsidiaries relied on to minimize U.S. tax exposure. Entities that were previously tax-neutral may now generate significant inclusions. 

The real battleground has shifted to economic substance. Tax authorities are using the International Benefits Test to disallow intercompany service charges that lack a documented Benefit Study proving the recipient received a specific, quantifiable advantage. Generic management fee invoices no longer pass muster. Similarly, on intangibles, authorities are applying the Development, Enhancement, Maintenance, Protection, and Exploitation (DEMPE) framework to look past legal IP ownership and identify where strategic decision-making and R&D leadership actually sit. If the “brain” is in a high-tax country but the IP is parked in a low-tax jurisdiction, companies face Hard-to-Value Intangible (HTVI) audits and potential retroactive royalty adjustments that were never built into the original tax strategy. 

The most expensive transfer pricing strategy in 2026 is one that looks compliant on paper but lacks documented operational reality behind it. Companies that still treat transfer pricing as an annual filing exercise — rather than an ongoing, data-driven function tied to how the business actually runs — are the ones most likely to be caught off guard. 

What Tax Leaders Should Do Next 

Transfer pricing in 2026 is no longer about what you file — it is about what you can prove, in real time, with data that matches operational reality. For tax leaders at multinational corporations, the practical next steps fall into five areas: 

1. Audit your data architecture before a tax authority does. Map the flow of intercompany transactions through your ERP and confirm that segmented P&Ls, Master File data, and transactional records reconcile. If your systems cannot produce entity-level data on demand, that is your first priority — not next year’s report. 

1. Pressure-test substance, not just pricing. Revisit functional analyses for your highest-risk entities and ask whether they reflect today’s business, not the structure you documented three years ago. Where gaps exist between legal form and operational reality, close them proactively. 

1. Build Benefit Studies and DEMPE documentation as standing assets. Don’t wait for an International Benefits Test challenge or an HTVI audit. Maintain living documentation that ties intercompany service charges and IP ownership to measurable, decision-making activity. 

1. Reassess your Pillar Two and OBBBA exposure holistically. U.S. qualifying jurisdiction status under Pillar Two and the loss of the QBAI exclusion both change the calculus. Model the combined effect on subsidiaries that were previously tax-neutral and identify where a single transfer pricing challenge could cascade across your global position. 

1. Shift from annual filing to continuous compliance. Stand up a cross-functional process — tax, finance, IT, and operations — that monitors intercompany flows on an ongoing basis. The tax authorities are already operating in near real time; your function needs to do the same. 

The cost differential is stark: reconstructing evidence under audit pressure runs roughly five times the cost of building a proactive strategy upfront. The leaders who start now will spend the next audit cycle defending clean, coherent positions. The ones who wait will spend it explaining gaps they didn’t know they had.