Action Item 13: Guidance on Transfer Pricing Documentation and Country-by-Country Reporting

October 2015

Organisation for Economic Co-operation and Development (OECD) Issues Final Report on Action Item 13: Guidance on Transfer Pricing Documentation and Country-by-Country Reporting

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The Organisation for Economic Cooperation and Development (OECD), a non-governmental forum established to promote economic growth, has developed a 15-point action plan to shape “fair, effective and efficient tax systems.” The OECD’s project regarding Base Erosion and Profit Shifting (BEPS) has addressed issues arising from tax planning strategies that exploit gaps or mismatches in member countries’ tax rules.


This alert is one installment in a series of alerts on the release of the OECD/G20 Base Erosion and Profit Shifting Project (the BEPS Project).
On October 5, 2015, the OECD released the final report (the “Report”) of the BEPS Project. This alert discusses Action Item 13: Guidance on Transfer Pricing Documentation and Country-by-Country Reporting

Background and Details

In an effort to address BEPS issues in a coordinated and comprehensive manner, the G20 finance ministers called on the OECD to develop an action plan to equip countries with instruments that will better align tax with economic activity. Action Item 13 of the BEPS Project contains recommendations for transfer pricing documentation, which relies on a three-tiered approach and a revised template for country-by-country (“CbC”) reporting. 

Under the first tier of the approach, multinational enterprises (“MNEs”) are advised to supply tax administrations with high-level information about their global business operations and existing transfer pricing policies in a “master file.”  This file is intended to be available to each relevant tax administration upon request. 

The second tier prescribes an additional “local file,” which contains detailed, transactional transfer pricing documentation specific to each country.  The file should include information such as the identification of material related party transactions, specific transaction amounts, and any economic analyses of the transfer pricing transactions.

Finally, the third tier requires large MNEs that have consolidated annual revenues equal to or in excess of €750 million (approximately $841 million), to use a CbC template to report the amount of revenue, profit before income tax, and income tax paid and accrued.  MNEs are further required to disclose specific information including;  number of employees, value of capital, retained earnings, tangible assets, the identification of each entity within a group operating in a particular tax jurisdiction, and information about the business activities each entity is engaged in. 

The three sets of documentation (master file, local file, and country-by-country template) will help MNEs articulate a consistent transfer pricing position as well as provide tax administrations with a holistic approach to assess transfer pricing risks and proceed with audit inquiries.  The OECD and participating countries believe the consolidated information and new reporting provisions will encourage transparency and reduce BEPS activities.

The new country-by-country reporting requirements are scheduled to be implemented on or after January 1, 2016, and are subject to review in 2020.  Flexibility for implementation will be provided as some jurisdictions may need additional time to enact the appropriate domestic legislation to incorporate the action item recommendations.

BDO Insights

Action Item 13 intends to bring forth a new level of transparency for MNEs and will require an increased amount of information reporting by MNEs in connection with transfer pricing arrangements.   MNEs should begin preparations to meet the implementation targets set by the OECD by assessing their internal data gathering and retrieval processes, analyzing resources, and developing internal procedures around the new reporting requirements.

For more information, please contact one of the following practice leaders:

Robert Pedersen
International Tax Practice Leader


William F. Roth III


Bob Brown


Jerry Seade

Scott Hendon

Joe Calianno
Partner and International Technical
Tax Practice Leader

Monika Loving

Michiko Hamada
Senior Director

Brad Rode
  Chip Morgan