When related companies trade with each other, Nepal follows the international principle that transactions must stand at a price the open market would have set. The transfer pricing rules monitor exercises between associated enterprises, because shifting profit through inflated invoices is the classic method of reducing tax. The duty sits with the taxpayer to prove the arm's length outcome. The department examines cross-border and domestic related-party deals, case by case, and compares the prices actually charged with the outcomes independent businesses would produce. Where the examination finds distortion, income is adjusted, tax reassessed and interest and penalties attach to the difference. Documentation is the practical shield. Companies in groups should maintain for each related-party transaction the contract, the pricing method, the comparables used and the calculations behind the price. The file is kept ready for the department, typically during audit or assessment. Firms that build the file as the transactions happen convert a statutory duty into a defensible record.