This approach to transfer pricing documentation will provide tax administrations with relevant and reliable information to perform an efficient and robust transfer pricing risk assessment analysis. It will also provide a platform on which the information necessary for an audit can be developed and provide taxpayers with a means and an incentive to meaningfully consider and describe their compliance with the arm’s length principle in material transactions.
TPG2022 Chapter V paragraph 5.17
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By OECD
Category: OECD Transfer Pricing Guidelines (2022), TPG2022 Chapter V: Transfer Pricing Documentation | Tag: Three tiered approach, Transfer pricing documentation
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- TPG2022 Chapter V paragraph 5.16In order to achieve the objectives described in Section B, jurisdictions should adopt a standardised approach to transfer pricing documentation. This section describes a three-tiered structure consisting of (i) a master file containing standardised information relevant for all MNE group members; (ii) a local file referring specifically to material transactions...
- TPG2022 Chapter V paragraph 5.32Not all transactions that occur between associated enterprises are sufficiently material to require full documentation in the local file. Tax administrations have an interest in seeing the most important information while at the same time they also have an interest in seeing that MNE groups are not so overwhelmed with...
- TPG2022 Chapter V paragraph 5.28Taxpayers should not be expected to incur disproportionately high costs and burdens in producing documentation. Therefore, tax administrations should balance requests for documentation against the expected cost and administrative burden to the taxpayer of creating it. Where a taxpayer reasonably demonstrates, having regard to the principles of these Guidelines, that...
- TPG2022 Chapter V paragraph 5.27Each taxpayer should endeavour to determine transfer prices for tax purposes in accordance with the arm’s length principle, based upon information reasonably available at the time of the transaction. Thus, a taxpayer ordinarily should give consideration to whether its transfer pricing is appropriate for tax purposes before the pricing is...
- TPG2022 Chapter V paragraph 5.26Annex III to Chapter V of these Guidelines contains a model template for the Country-by-Country Report together with its accompanying instructions....
- TPG2022 Chapter V paragraph 5.25The Country-by-Country Report will be helpful for high-level transfer pricing risk assessment purposes. It may also be used by tax administrations in evaluating other BEPS related risks and where appropriate for economic and statistical analysis. However, the information in the Country-by-Country Report should not be used as a substitute for...
- TPG2022 Chapter V paragraph 5.24The Country-by-Country Report requires aggregate tax jurisdiction-wide information relating to the global allocation of the income, the taxes paid, and certain indicators of the location of economic activity among tax jurisdictions in which the MNE group operates. The report also requires a listing of all the Constituent Entities for which...
- TPG2022 Chapter V paragraph 5.23Annex II to Chapter V of these Guidelines sets out the items of information to be included in the local file....
- TPG2022 Chapter V paragraph 5.22In contrast to the master file, which provides a high-level overview as described in paragraph 5.18, the local file provides more detailed information relating to specific intercompany transactions. The information required in the local file supplements the master file and helps to meet the objective of assuring that the taxpayer...
- TPG2022 Chapter V paragraph 5.14In situations where a proper transfer pricing risk assessment suggests that a thorough transfer pricing audit is warranted with regard to one or more issues, it is clearly the case that the tax administration must have the ability to obtain, within a reasonable period, all of the relevant documents and...