Local File — Entity-Level TP Documentation (OECD BEPS Action 13)

The Local File is the second tier of the BEPS Action 13 three-tiered approach. It focuses on the intra-group transactions of the local entity and demonstrates that the transfer prices applied comply with the arm's length principle. Unlike the Master File, the Local File is transaction-specific and prepared locally.

• Local entity: Management structure, strategy, competitive environment
• Controlled transactions: Description, amounts, counterpart group companies
• Arm's length analysis: Method selection, benchmarking, comparables
• Financial information: Local entity financial statements, segment data

The Local File was standardised — alongside the Master File — by BEPS Action 13. An initial version was published in September 2014; the definitive standard followed in the final report of October 2015. Previously, almost every country had its own documentation requirements with widely varying scope and content. Germany, for instance, had detailed documentation obligations since 2003 (section 90(3) AO, Gewinnabgrenzungsaufzeichnungsverordnung) and updated them to the OECD standard in 2017. BEPS Action 13 created a uniform minimum standard that jurisdictions may supplement with stricter national requirements. The detailed content structure of the Local File is laid out in Chapter V Annex II of the OECD Transfer Pricing Guidelines.

The Local File concerns every local entity engaged in controlled (intra-group) transactions in a jurisdiction that has implemented BEPS Action 13. The documentation obligation depends on national thresholds (e.g. transaction value, entity revenue). It covers:

• All material controlled transactions (goods, services, IP, financing)
• Both cross-border and domestic controlled transactions (depending on national law)

The Local File must be prepared contemporaneously — typically by the tax return filing deadline. Non-compliance or insufficient documentation may trigger reversal of the burden of proof, fines, and estimation powers by the tax authority (depending on national legislation).

• Local entity description: management structure, competitive environment, strategy
• Transaction description for each controlled transaction and parties involved
• Functional and risk analysis (Functions, Assets, Risks — FAR)
• Method selection and justification including benchmarking study
• Financial information: financial statements, transaction-level data
• Evidence of arm's length compliance for the applied transfer price
• Existing APAs and tax rulings (Advance Pricing Agreements, binding rulings) relating to the documented transactions
• Free-format document: Unlike CbCR, there is no prescribed OECD XML schema; the content structure follows Chapter V Annex II of the OECD Transfer Pricing Guidelines

2 corrections:
- September 2014 document missing as milestone
- last_amended 2022-01-20 not traceable
1 update:
- Missing key_dates for Germany (2017)
3 clarifications.
4 notes.