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We recommend that adequate transfer pricing documentation is in place to ensure transfer prices involving controlled foreign companies (CFCs) are in accordance with the arm's-length standard. In terms of our compliance programme, data collected from CFC disclosures is collated with data from other sources to determine transfer pricing risk.

Particular attention is paid to situations involving abnormal profit levels, significant fluctuations in profit, intangible property transactions and material financing arrangements.

Disclosure requirements

Taxpayers with an income interest of 10% or greater in a CFC are required to complete the Foreign investment fund/Controlled foreign company disclosure(s) - IR458 form electronically. Forms completed in hard copy only and posted to us will not meet the disclosure requirements.

Information from the disclosure form is reviewed to scope potential transfer pricing risks, along with other broader risks. For example, the disclosure form requires the following information for each CFC.

  • The CFC's name.
  • The primary business activity.
  • The country of incorporation or tax residence.
  • Key financial data (including: gross revenue, royalty income, net profit / (loss) before tax, and total assets).
  • The number of employees.
  • Other information prepared while performing the active business test and calculation of CFC income.

File a controlled foreign company disclosure