BEPS Action 13

Definition

BEPS Action 13 is an OECD initiative that established a standardized three-tiered approach to transfer pricing documentation: the Master File, Local File, and Country-by-Country Report (CbCR). Published in 2015 as part of the OECD's Base Erosion and Profit Shifting (BEPS) project, Action 13 aims to enhance transparency and provide tax authorities with adequate information to assess transfer pricing risks.

Action 13 has been adopted by over 140 jurisdictions through the Inclusive Framework on BEPS, making it the global standard for transfer pricing documentation.

OECD/Regulatory Reference

The BEPS Action 13 Final Report (2015), titled "Transfer Pricing Documentation and Country-by-Country Reporting," introduced a three-tiered standardized approach consisting of:

1. Master File: Standardized information relevant for all MNE group members
2. Local File: Documentation specific to material transactions of the local taxpayer
3. Country-by-Country Report: Information on the global allocation of income and taxes paid

The OECD Transfer Pricing Guidelines (2022) incorporate Action 13 guidance in Chapter V and Annexes I-IV. The Guidelines explain that the purposes of requiring Master File and Local File documentation are to: (1) ensure taxpayers give appropriate consideration to transfer pricing requirements when establishing prices, and (2) provide tax administrations with information to conduct informed transfer pricing risk assessments.

In Practice

The Three-Tiered Documentation Structure:

Filing Thresholds:

Implementation Timeline:

Example

MNE Profile: USCo (parent) with subsidiaries in Germany, UK, Japan, and Brazil. Consolidated revenue: €2 billion.

Action 13 Documentation Requirements:

Information Flow Under Action 13:

Action 13 Objectives

Related Terms

• Master File — First tier of Action 13 documentation
• Local File — Second tier of Action 13 documentation
• Country-by-Country Report (CbCR) — Third tier of Action 13 documentation

Further Reading

• Transfer Pricing Documentation Guide — Implementing the three-tiered approach
• Master File Best Practices — Optimizing Master File preparation
• CbCR Preparation Guide — Avoiding common CbCR errors

Frequently Asked Questions

Is BEPS Action 13 legally binding?

BEPS Action 13 itself is OECD "soft law"—not legally binding until adopted into domestic legislation. However, over 140 jurisdictions have implemented Action 13 through their domestic laws, making compliance effectively mandatory for MNEs operating in these countries. Non-member countries in the Inclusive Framework also commit to implementing the minimum standards.

What is the €750 million threshold based on?

The €750 million consolidated group revenue threshold was selected to capture the largest MNEs while exempting smaller groups from CbCR reporting. This threshold applies to approximately 10-15% of MNEs but covers the vast majority of global trade value. Local File and Master File thresholds vary by jurisdiction and may be lower.

Do all three documents need to be filed with tax authorities?

Filing requirements vary by jurisdiction. CbCR is typically filed with the tax authority of the ultimate parent entity and exchanged automatically with other jurisdictions. Master File and Local File requirements vary—some jurisdictions require filing with the return; others require documents to be available upon request within specified timeframes.

How has Action 13 evolved since 2015?

The OECD continues to refine Action 13 guidance. Key developments include: enhanced guidance on CbCR data use (2017), public CbCR initiatives (ongoing), updated Model Legislation, and consideration of digital filing formats (XML schema). The EU has adopted public CbCR requirements for certain large MNEs.

What penalties apply for Action 13 non-compliance?

Penalties vary by jurisdiction and document type. CbCR penalties can be substantial—up to €1 million in some jurisdictions for failure to file. Master/Local File penalties typically relate to documentation failures and may include penalty surcharges on any resulting tax adjustment, shifted burden of proof, or fixed penalties per document.

How does Action 13 relate to other BEPS Actions?

Action 13 supports the entire BEPS framework by providing transparency. Actions 8-10 (transfer pricing for intangibles, risks, and other high-risk transactions) rely on Action 13 documentation for implementation. Action 5 (harmful tax practices) uses CbCR data for substance assessment. The documentation framework enables enforcement of all transfer pricing-related BEPS actions.

Can CbCR data be used to make transfer pricing adjustments?

The OECD explicitly discourages this. The Guidelines state CbCR data should be used for high-level risk assessment only—not as a substitute for detailed transfer pricing analysis or as a basis for proposing adjustments. However, some tax authorities have used CbCR data to initiate audits that lead to adjustments based on subsequent analysis.