Master File — The Master File is a standardized transfer pricing document that provides tax authorities with a high level overview of the multinational enterprise's (MNE) global business operations, transfer pricing policies, and income allocation.
The Master File is a standardized transfer pricing document that provides tax authorities with a high-level overview of the multinational enterprise's (MNE) global business operations, transfer pricing policies, and income allocation. Introduced under OECD BEPS Action 13, the Master File gives tax authorities the "big picture" context for evaluating transfer pricing in any specific jurisdiction.
The Master File is one component of the three-tiered documentation structure: Master File (global overview), Local File (country-specific details), and Country-by-Country Report (financial data by jurisdiction).
OECD/Regulatory Reference
The OECD Transfer Pricing Guidelines (2022), Annex I to Chapter V, prescribe the Master File content. The Guidelines specify that the Master File should contain standardized information relevant for all MNE group members—providing an overview of the group's business, including global operations, transfer pricing policies, and allocation of income and economic activity.
BEPS Action 13 (2015) introduced the three-tiered documentation approach. The Master File should be available to all relevant tax administrations to provide context for Local File analysis.
In Practice
Master File Contents (OECD Standard):
Section
Content
Organizational Structure
Legal entity chart, geographic locations
Business Description
Principal activities, key profit drivers
Intangibles
IP ownership, R&D activities, transfer pricing for intangibles
Intercompany Financial Activities
Financing arrangements, treasury functions
Financial and Tax Positions
Consolidated financials, APAs, rulings
Key Characteristics:
Global Scope: One Master File for the entire MNE group
Centralized Preparation: Typically prepared by headquarters
Annual Update: Refreshed annually (or when material changes occur)
Shared Across Jurisdictions: Same Master File provided to all tax authorities
Consistency is Critical: The Master File is shared with multiple tax authorities who may exchange information. Ensure descriptions of functions, risks, and policies are consistent and supportable in every jurisdiction.
Example
MNE Structure: US parent with subsidiaries in Germany, UK, and Mexico
Master File Contents:
Section
Example Content
Org Chart
USCo (Parent) → GermanCo, UKCo, MexicoCo
Business Description
Consumer electronics manufacturing and distribution
Value Chain
R&D (US) → Manufacturing (Mexico) → Distribution (Germany, UK)
IP Ownership
All patents and trademarks owned by USCo
TP Policies
Cost-plus for manufacturing, resale margin for distribution
Financing
Centralized treasury in US, intercompany loans at SOFR+200bps
Master File vs. Local File
Aspect
Master File
Local File
Scope
Entire MNE group
Single jurisdiction
Perspective
Global overview
Transaction-specific detail
Preparer
Headquarters/central TP team
Local entity/advisors
Content
Policies, structure, global allocation
Benchmarking, specific transactions
Audience
All tax authorities
Local tax authority
Related Terms
Local File — Country-specific transfer pricing documentation
Requirements vary by jurisdiction. Many countries have adopted BEPS Action 13 and require Master Files for MNEs above certain thresholds (often based on consolidated revenue). Countries like Germany, UK, Australia, and many others require Master Files. Check specific local requirements—thresholds and deadlines differ.
What's the revenue threshold for Master File requirements?
Common thresholds range from €50M to €750M consolidated group revenue, depending on jurisdiction. Some countries have lower thresholds or no threshold. The OECD suggested €750M as the CbCR threshold, but Master File thresholds are set locally.
How detailed should the Master File be?
The Master File should provide sufficient context for tax authorities to understand your global operations and TP policies, but it's not meant to replace Local File detail. Think "overview" not "exhaustive analysis." Typically 20-50 pages depending on group complexity.
Can the Master File be in English for all jurisdictions?
Many jurisdictions accept English Master Files, but some require local language translation. Check specific country requirements. Some accept English with a local language summary.
How often must the Master File be updated?
Annually, or when material changes occur (restructurings, new business lines, significant acquisitions). Most jurisdictions require the Master File to reflect the fiscal year under review. Some allow using prior-year Master Files with updates.
What happens if Master File and Local File are inconsistent?
Inconsistencies raise red flags for tax authorities, who may exchange information. Ensure the Master File's descriptions of functions, risks, and policies align with Local File detail. Discrepancies can trigger audits and credibility challenges.
Who prepares the Master File?
Typically headquarters or the central TP team, sometimes with support from external advisors. Local subsidiaries provide input on their operations. Centralized preparation ensures consistency across the global description.