SolvedIEIM300170 | Country-by-Country reporting: Master and Local files
From HM Revenue & Customs · International Exchange of Information Manual
The UK rules use many terms and definitions that are taken from the OECD guidance and that guidance should be checked when completing a CbC report.
The Action 13 report details a standardised approach for transfer pricing documentation, these being the master file and local file, as well as the Country-by-Country report. The master file contains a high level overview of the group’s global business operations and transfer pricing policies; the local file provides detailed transactional transfer pricing documentation for a specific jurisdiction identifying material related party transactions, the amounts involved and the company’s transfer pricing analysis of those transactions. Annexes I and II of the Action 13 report set out the documentation expected in master and local files.
The Action 13 report highlights that some transactions are not sufficiently material to require full transfer pricing documentation, thereby recognising that the analysis retained should be both proportionate and appropriate to the size and complexity of the business and transactions involved. HMRC has introduced a requirement for UK entities that are part of a multinational enterprise (MNE) group with consolidated group revenue of €750 million or more are required to keep and preserve a Master File and a Local File in line with the recommendations of Action 13. The Master File and Local File must be prepared in accordance with the 2022 OECD Transfer Pricing Guidelines. See INTM450000 for further information.
For businesses that are not required to keep and preserve a Master File or Local File, it remains a requirement that the transfer pricing documentation retained must adequately demonstrate that customer transfer pricing meets the arm’s length standard
Further guidance on transfer pricing documentation can be found here: