Transfert price (APP) – Master file and local file documentation plan
The importance of intra-group transactions in the industrial acceleration zone or in the territory subject to common law and the documentation of transfer prices have become a real prerogative for these companies to document their transactions in accordance with OECD regulations. . It is therefore appropriate to speak of tax optimization on a global scale.
Our article is divided into two levels of documentation: a main file containing information relating to all the members of the multinational group prepared on a contemporary and annual basis. And a local file specific to each member entity of the multinational group allowing proof of compliance with the arm’s length principle of its intragroup transactions, also prepared on a contemporary and annual basis.
Documentation called “master file”. It contains
1. A general description of the company and its strategy
2. A general description of the organizational structure of the group to which it belongs:
3. A general inventory of associated enterprises engaged in controlled transactions involving enterprises established in the European Union
4. An inventory of controlled transactions involving associated undertakings established in the European Union, i.e. an inventory of transaction flows (tangible and intangible assets, services, financial elements) of invoicing flows and amounts of transaction flow;
5. A general description of the functions performed and the risks assumed as well as the changes in these functions and risks compared to the previous fiscal year (eg change from the status of distributor to that of commissionaire);
6. A list of tangible assets held and royalties received or paid;
7. A description of the group’s transfer pricing policy and a description of the transfer pricing methodology explaining the extent to which the business’s transfer prices comply with the arm’s length principle:
8. A list of cost sharing agreements and APAs involving a member of the group established in the European Union:
9. A declaration by which the taxpayer undertakes to provide the administration with additional information within a reasonable time and in compliance with national rules.
Documentation specific to each country called “local file”. It is composed, on the model of the previous one, of six essential points:
I. A detailed description of the business and its strategy;
2. A description and explanation of the controlled transactions specific to the country concerned, detailing the transaction flows (tangible assets, intangibles, services, financial elements), the invoicing flows and the amounts of the transaction flows:
3. A comparability analysis including: the characteristics of the goods and services, a functional analysis (functions performed, assets used, risks assumed), the contractual clauses, the economic situation and the commercial strategies pursued;
4. An explanation of the selection and application of the transfer pricing method;
5. Relevant information relating to internal and external comparators;
6. A description of the implementation and application of the group’s transfer pricing policy.
Companies will also have the option of including all or part of the country-specific documentation in the lead documentation.