Master and local file: preparing for the transfer pricing culture of compliance

From BEPS Action 13, country by country reporting has attracted the headlines. However, the OECD’s master and local file recommendations for transfer pricing documentation are also key enablers of the intended ‘culture of compliance’. The master and local file approach will potentially trigger a significant increase in necessary documentation. Tax jurisdictions are updating their practices and passing laws to incorporate the changes; and taxpayers should plan for how they will manage these. Failing to do so will increase the risk of tax authority challenge, as well as creating a risk of internal compliance cost and inefficiency.