Why Accurate Data Matters in Transfer Pricing

Accurate Data Is Essential for Transfer Pricing Compliance

Transfer pricing (TP) regulations have become increasingly stringent across Southeast Asia, with countries like Vietnam and Malaysia placing greater scrutiny on intercompany transactions. In this context, access to accurate and up-to-date data is not just beneficial — it’s essential for ensuring compliance and mitigating tax risk.

At the core of TP compliance lies the arm’s length principle, which requires that transactions between related parties reflect the pricing that would occur between unrelated parties under similar conditions. To justify this, businesses must rely on benchmarking studies and comparability analyses based on high-quality data. Inaccurate or outdated financials, misclassified industry peers, or unreliable sources can undermine the credibility of your TP documentation and increase the likelihood of costly adjustments.

For companies operating across borders the challenge is twofold: accessing comparable data for private companies and navigating differences in disclosure standards. Many local firms are privately held and do not publish financials in a consistent format, which makes regional benchmarking difficult without a comprehensive and structured data source.

Southeast Asia Faces Rising TP Scrutiny and Data Challenges

Key Trends in Transfer Pricing

Southeast Asian countries such as Vietnam and Malaysia have updated their regulations to align more closely with OECD guidelines, reflecting a global shift towards stricter TP compliance. Governments are demanding more detailed local files, master files, and country-by-country reporting. In parallel, there is growing regional cooperation on tax matters, with data-sharing agreements between tax authorities making cross-border audits more common.

Another notable trend is the rising importance of industry-specific benchmarking. Regulators now expect businesses to demonstrate a nuanced understanding of their sector, rather than relying on broad comparability pools. As a result, businesses are seeking more granular data to refine their TP analyses and avoid blanket assumptions that may not withstand audit scrutiny.

Challenges Facing Businesses in Southeast Asia

Despite developments in TP, companies still face significant hurdles. One major challenge is the availability and reliability of comparable company data. In markets like Vietnam and Malaysia many companies are private, and financial disclosure remains limited or inconsistent. This complicates the process of finding true comparables for benchmarking.

Additionally, local regulatory interpretations often vary despite shared OECD frameworks. What may be acceptable in one jurisdiction could trigger an audit in another. Navigating these differences requires businesses to stay updated on evolving local practices while maintaining defensible, data-backed transfer pricing documentation.

Without access to reliable and structured company data, businesses operating across Southeast Asia risk costly adjustments, penalties, or prolonged disputes with tax authorities.

Reliable Data Is the Foundation of TP Benchmarking Accuracy

Transfer pricing benchmarking hinges on one critical factor: finding reliable and comparable company data. Without it, even the most well-intentioned TP documentation can fall short of regulatory expectations. For businesses operating across Southeast Asia, the challenge is especially pronounced due to the region’s diversity in company size, disclosure standards, and industry classification systems.

One key issue is the prevalence of private companies that do not publish comprehensive financials. These businesses generally make up a large portion of the market, but their data is often scattered, inconsistently reported, or simply unavailable through public registries. Even where financials exist, differences in accounting standards and reporting formats can reduce comparability.

To address this, many firms rely on third-party databases that consolidate and standardise financial data from multiple sources. However, not all platforms are created equal. An effective data provider for TP benchmarking should offer access to:

• Both public and private companies
• Regional filtering and industry classification tools
• Normalised financials and ratio analysis
• Transparent data sources and audit trails

Company Data Strengthens Transfer Pricing Defensibility

Transfer pricing documentation requires more than just demonstrating that prices are “reasonable.” To meet regulatory expectations, especially in jurisdictions like Malaysia and Vietnam, companies must provide clear evidence that their intercompany transactions align with the arm’s length principle. This is where high-quality company data becomes essential.

Company data helps businesses create robust comparability analyses by identifying similar entities operating in the same industry, region, and economic environment. By using detailed financials — including profitability ratios, cost structures, and business activities — businesses can support transfer pricing policies with defensible benchmarks. This is particularly valuable when preparing local files, where authorities expect detailed justification for pricing methodologies and selected comparables.

Moreover, company data can also assist in segmenting functions and risk profiles, which is a key requirement in many TP frameworks. For example, a manufacturing subsidiary in Vietnam may assume a limited-risk role, and its profit margins should reflect that positioning. Access to comparable entities with similar risk levels allows businesses to make these distinctions clearly and support them with external data.

Industry Data Enhances Precision in Comparability Analysis

In transfer pricing, finding comparable companies is only one part of the equation. Equally important is understanding the industry context in which those companies operate. Industry data adds depth and precision to comparability analysis by helping businesses interpret financial results within the appropriate competitive and economic landscape.

Tax authorities across Southeast Asia increasingly expect businesses to demonstrate that their selected comparables not only operate in the same broad sector but also face similar market conditions, business cycles, and cost structures. For example, two companies may both be in “manufacturing,” but one may operate in high-volume consumer electronics, while the other focuses on precision engineering for aerospace. Without proper industry segmentation, the analysis risks being too broad — and therefore less defensible.

Industry data provides benchmarks such as average profit margins, common pricing models, typical functions performed, and risk levels across segments. This is especially important when applying methods like the transactional net margin method (TNMM), which rely heavily on selecting appropriate comparables and interpreting their financial performance accurately.

Furthermore, industry-specific insights help explain variances in margins or business models that may otherwise raise red flags during audits. When a business can show that its results align with broader industry trends — or justify deviations based on credible market data — it strengthens its position significantly.

In short, robust industry data turns a surface-level analysis into a comprehensive, defensible TP narrative.

Functional Analysis Requires More Than Just Financials

While financial benchmarking is central to transfer pricing, it is only one part of a complete transfer pricing analysis. Tax authorities are placing increasing emphasis on functional analysis — a qualitative assessment of the functions performed, assets used, and risks assumed (commonly referred to as FAR analysis) by each party in a controlled transaction.

Accurate data supports functional analysis in two ways. First, company-level disclosures, such as business descriptions and segment reporting, help identify how a company generates its value. This provides critical context when classifying an entity as a limited-risk distributor, full-fledged manufacturer, or service provider. Second, industry-level benchmarks assist in assessing whether the roles and risks assumed by the tested party align with those of its peers.

Without this supporting data, businesses may default to generic or inaccurate assumptions — for example, classifying a subsidiary as “limited risk” without proof. Such gaps can invite audits or lead to disputes if authorities view the classification as unjustified. Worse, the absence of FAR detail may undermine the entire pricing methodology, even if the numerical benchmarks are sound.

Incorporating both qualitative and quantitative data ensures a more holistic and defensible transfer pricing narrative. It shows regulators that your pricing decisions are rooted in substance — not just spreadsheet logic.

Proactive Use of Data Reduces Transfer Pricing Audit Risk

Transfer pricing audits are becoming more frequent and more thorough across Southeast Asia. Tax authorities in countries like Vietnam and Malaysia are investing in training, inter-agency cooperation, and data analytics tools to identify inconsistencies in intercompany transactions. As a result, the risk of audit — and the potential for costly adjustments and penalties — is rising for businesses operating across borders.

One of the most effective ways to reduce audit risk is to adopt a proactive, data-driven approach to TP compliance. This begins with preparing comprehensive documentation that clearly explains the rationale behind transfer prices, supported by credible benchmarking and industry data. Businesses that wait until an audit is initiated to gather this information are often left scrambling — and vulnerable to challenges.

Auditors expect to see structured and well-reasoned analysis. This includes:

• A clear explanation of the chosen transfer pricing method
• Justification for the selection of comparables
• Supporting financial and industry data
• Consistency across local and group-wide documentation

Errors or vague explanations can quickly lead to deeper investigations. Even if the pricing is ultimately defensible, the cost of responding to an audit — both in time and resources — can be significant.

By preparing robust documentation in advance, supported by reliable data, businesses not only improve compliance but also demonstrate transparency and good faith. This can deter aggressive audits and help resolve disputes more efficiently if they arise. In today’s regulatory landscape, being audit-ready is not optional — it’s part of prudent risk management.

Let Speeda Streamline Your Transfer Pricing Workflow

Accurate, structured data is the foundation of effective transfer pricing — and the right tools can make all the difference. Speeda is purpose-built to support businesses in Southeast Asia with their transfer pricing needs. With access to a comprehensive database of public and private companies across ASEAN, Speeda allows users to:

• Identify relevant comparables based on industry, region, and financial performance
• Access normalised financials and peer benchmarking
• Explore industry classifications and segment insights for stronger comparability analysis

Explore Speeda now—streamline your TP documentation, cut research time, and eliminate audit preparation uncertainty.