The new frontier of dispute resolution lies not in documenting a transaction, but in demonstrating that the documented transaction aligns with the parties’ actual economic conduct.
For years, the debate on Transfer Pricing was dominated by a seemingly sufficient question: whether the taxpayer had prepared a study, selected a method, and placed its results within an arm’s-length range. That question is no longer enough. The trend in case law across the Americas reflects a more demanding shift: courts and tax authorities are no longer asking merely what the study says, but whether the transaction actually occurred as documented, whether the economic substance matches the legal form, and whether the evidence supports the position taken.
This change is significant. It involves shifting from a logic of documentary compliance to a logic of evidentiary defense. In Transfer Pricing, the technical report should no longer be viewed as the formal fulfillment of an annual obligation, but rather as the starting point for a more challenging question: Can the taxpayer prove, with verifiable evidence, that the functions, assets, and risks attributed to each entity reflect the group’s economic reality?
The first major trend is the increased emphasis on the FAR analysis—functions, assets, and risks—as the focal point of the dispute. In practice, cases are no longer resolved solely by the choice of a method or the existence of comparables. They are resolved based on the ability to demonstrate who performed the relevant functions, who controlled the risks, who used or contributed significant assets, and who had the actual capacity to bear the economic consequences of the transaction. The OECD Guidelines identify functional analysis and the proper delineation of the transaction as central elements in the application of the arm’s-length principle.
This creates an obvious tension. Many multinational groups continue to document transactions under simple contractual categories: distributor, service provider, licensee, contract manufacturer, or intragroup financier. However, tax audits and case law tend to look beyond mere formality. If an entity presents itself as a low-risk distributor but incurs recurring losses, finances inventory, assumes significant commercial risks, or makes local strategic decisions, the contractual label may lose its weight. If an entity is compensated as a routine service provider but controls crit y functions or manages strategic assets, the agreed-upon margin may be insufficient. In other words, form no longer provides protection when substance tells a different story.
The second trend is the growing use of the DEMPE analysis in disputes over intangibles. The development, enhancement, maintenance, protection, and exploitation of intangibles are not merely doctrinal concepts. They have become an evidentiary framework for determining who should capture the economic return associated with trademarks, technology, know-how, databases, platforms, patents, or business relationships. The OECD Guidelines shifted the emphasis from legal ownership alone to an analysis of who develops, improves, maintains, protects, and exploits the intangibles, as well as who controls the associated risks.
This raises another area of conflict. Many contracts assign ownership of intangible assets to a central entity within the group, but value creation may be distributed across multiple jurisdictions. The critical question is no longer solely who legally owns the intangible asset, but who develops it, who finances its development, who controls the risks, who decides on its commercial exploitation, and who effectively protects its value. In disputes over royalties, intangible marketing assets, or digital platforms, this distinction can completely alter the allocation of income.
The third trend is the increasingly intense focus on economic substance. This concept has become the point of intersection between law and economics. Courts are not merely assessing whether contracts, invoices, or studies exist, but whether those documents reflect a verifiable economic reality. Economic substance requires an examination of conduct, capacity, traceability, decisions, risks, benefits, and results. A Transfer Pricing policy may be formally documented and yet still be weak if it fails to explain why the allocation of profitability reflects the parties’ actual economic contributions.
This tension is particularly evident in four types of transactions. In intra-group services, the dispute typically centers on the Benefit Test: whether the service was actually provided, whether it generated an identifiable benefit, and whether the charge was reasonable. In intra-group financing, the debate revolves around borrowing capacity, credit ratings, implicit support, guarantees, currency, term, and market conditions. For intangibles, the discussion shifts toward DEMPE and value creation. For commodities, the focus is on reference prices, determination dates, risks assumed, and consistency between contractual documentation and economic performance.
The fourth trend is the recharacterization or redrawing of transactions when the legal form does not reflect the economic reality. This is likely one of the most sensitive issues for taxpayers. The tax authority can not only challenge the price; in certain cases, it seeks to challenge the transaction itself. Was it really a loan, or was it equity? Was it a service, or a duplication of functions? Was it a royalty, or a distribution of profits? Was it a low-risk distributor, or an entity that assumed significant business risks?
Reclassification creates tension because it touches on the line between legitimate planning, contractual autonomy, and the tax authority’s power of oversight. But it also reveals a practical lesson: the weaker the evidence linking the contract, conduct, and economic outcome, the greater the scope for the authority to reinterpret the transaction. Documentation should not be limited to describing what the group intended to do; it must demonstrate what it actually did.
In the Americas, recent cases confirm that Transfer Pricing disputes are becoming more sophisticated. In the United States, the Coca-Cola case demonstrated the economic magnitude that disputes over intangibles, royalties, and profit allocation among related entities can reach, with adjustments exceeding US$9 billion contested by the IRS.
The 3M case, for its part, highlighted the complex interplay between foreign local rules, royalties, legal payment restrictions, and reallocation powers under Transfer Pricing regulations. In 2025, the U.S. Court of Appeals for the Eighth Circuit held that the IRS could not reallocate royalty income that the taxpayer was legally prohibited from receiving due to restrictions under Brazilian law.
These cases show that the decisive test is not always the same. Sometimes it will be a robust functional analysis. Sometimes it will be the traceability of services. Sometimes it will be the documentation of strategic decisions. Sometimes it will be evidence regarding risk management. Sometimes it will be consistency between contractual policy and actual conduct. But in all cases, there is a common pattern: the dispute is defined by the ability to connect the legal structure with economic reality.
That is one of the central conclusions of *Transfer Pricing: The Decisive Evidence*, a work that compiles 50 cases of comparative jurisprudence from Latin America, the United States, and Spain. The book starts from a simple yet demanding premise: the difference between winning and losing a dispute rarely lies solely in knowing the law. It lies in the evidence, in the coherence of economic reasoning, and in anticipating the challenges raised by the authorities.
The underlying tension is clear. Companies want certainty. Authorities want substance. The courts demand evidence. And multinational groups operate in a reality where value chains are increasingly complex, integrated, digital, and difficult to categorize under traditional contractual frameworks.
For this reason, modern Transfer Pricing compliance can no longer rely solely on a study prepared at the end of the fiscal year. It must become an ongoing system of evidence management. This means monitoring the profitability of entities throughout the year, reviewing functional changes, documenting business decisions, maintaining evidence of services rendered, updating comparables, assessing financial risks, and verifying that the parties’ conduct is consistent with the signed contracts.
The central question for multinational groups in the Americas is no longer whether they have a Transfer Pricing report. That was the question of formal compliance.
The decisive question today is a different one:
if an audit or litigation begins tomorrow, can the company prove that the documented transaction reflects the economic reality of the business?
Because in Transfer Pricing, the evidence is not just an appendix. It is the arena where contractual form and economic substance are pitted against each other; where the FAR analysis ceases to be a mere description and becomes evidence; where DEMPE ceases to be a conceptual framework and instead defines who created, controlled, and realized value; and where a transaction may be accepted, adjusted, or recharacterized.
That is the new battleground.
And in that arena, it is no longer enough to simply document a position. You must be able to defend it.
In Transfer Pricing, the evidence does not merely support the case. The evidence decides the case.
