Last updated on Sep 6, 2024

How do you communicate your master file to internal and external stakeholders?

If you are involved in transfer pricing, you know that the master file is a key document that provides an overview of your multinational group's business, strategy, intangibles, and financial results. But how do you communicate your master file to internal and external stakeholders, such as local tax authorities, auditors, or business partners? In this article, we will share some tips and best practices to help you prepare and present your master file effectively and efficiently.

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1 Know your audience

The first step to communicate your master file is to understand who your audience is and what they expect from you. Different stakeholders may have different levels of interest, knowledge, and access to your master file. For example, local tax authorities may require more detailed and specific information than your internal management or auditors. Therefore, you should tailor your master file to suit the needs and preferences of your audience, and provide them with the appropriate level of detail, clarity, and transparency.

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CA Karan Jain

UAE Transfer Pricing Specialist I Decade in KPMG I Global Benchmarkings on Orbis - TP Catalyst, Loan Connector, RoyaltyStat and S&P Capital IQ I TP Practice Leader at Transactplus I
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Each stakeholder group—whether it's local tax authorities, internal management, or auditors—has unique priorities and varying degrees of familiarity with the content of the master file. For example, local tax authorities might require more granular and specific data to ensure compliance with local regulations, while internal management may be more concerned with strategic insights and the overall alignment with the company's goals. Therefore, it’s crucial to provide the appropriate level of detail, clarity, and transparency tailored to each audience.

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CA Sameer Khan

CFO | Manager - Corporate Tax & Audit | Startup Enthusiast | Fund Raising Compliance and Advisory | Financial Compliance and Strategy | Passionate about Fintech Innovation
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To share a master file: Internally: Decide who needs access and set permissions accordingly. Use secure tools like the company intranet or shared drives, and send a clear, friendly email with instructions. Offer support if needed and keep everyone updated on any changes. Externally: Identify who should receive the file and use secure methods like encrypted email. Provide a simple guide on how to use it and make sure to keep everything confidential. Be open to any questions or feedback they might have.

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2 Follow the guidelines

The second step to communicate your master file is to follow the guidelines and standards that apply to your jurisdiction and industry. The master file is part of the three-tiered documentation approach recommended by the OECD's Base Erosion and Profit Shifting (BEPS) project, which aims to enhance the transparency and consistency of transfer pricing practices. The OECD provides a template and a list of information that should be included in the master file, such as organizational structure, value chain analysis, intangible assets, and financial and tax information. However, some countries may have additional or different requirements, so you should check the local rules and regulations before preparing and submitting your master file.

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CA Karan Jain

UAE Transfer Pricing Specialist I Decade in KPMG I Global Benchmarkings on Orbis - TP Catalyst, Loan Connector, RoyaltyStat and S&P Capital IQ I TP Practice Leader at Transactplus I
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Although the OECD's BEPS project offers a solid framework for master file, these guidelines should be seen as a starting point rather than a complete solution. Each jurisdiction may adapt or expand upon these recommendations, bringing in specific requirements or highlighting different priorities. For example, certain countries may prioritize local economic impact or enforce stricter documentation standards for particular industries. By recognizing and understanding these variations, the master file can be appropriately tailored to not only meet basic compliance but also to proactively satisfy the expectations of the key stakeholders.

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3 Use a common language

The third step to communicate your master file is to use a common language that can be understood by your audience, regardless of their background, location, or culture. The master file should be written in a clear, concise, and coherent manner, using plain and simple words, avoiding jargon, acronyms, and technical terms. The master file should also be consistent in its terminology, format, and style, and avoid any contradictions or ambiguities. If you need to use a different language than the one used in your group's headquarters, you should ensure that the translation is accurate and faithful to the original meaning.

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4 Leverage technology

The fourth step to communicate your master file is to leverage technology to make your process more efficient and effective. Technology can help you automate, streamline, and standardize your master file preparation and presentation, saving you time, money, and resources. For example, you can use software tools to collect, organize, and analyze data from various sources, such as accounting systems, ERP systems, or databases. You can also use software tools to create, edit, and format your master file, using templates, charts, graphs, or tables. Additionally, you can use software tools to share, distribute, and store your master file securely, using cloud-based platforms, encryption, or digital signatures.

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5 Review and update

The fifth step to communicate your master file is to review and update it regularly, to ensure that it reflects the current and accurate situation of your group. The master file is not a static document, but a dynamic one that should be updated whenever there are significant changes in your group's business, strategy, intangibles, or financial results. You should also review your master file periodically, to check for any errors, omissions, or inconsistencies, and to align it with the latest guidelines and standards. By reviewing and updating your master file, you can enhance its quality, reliability, and credibility, and avoid any potential risks or disputes.

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CA Karan Jain

UAE Transfer Pricing Specialist I Decade in KPMG I Global Benchmarkings on Orbis - TP Catalyst, Loan Connector, RoyaltyStat and S&P Capital IQ I TP Practice Leader at Transactplus I
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Consider the master file as a living document that evolves alongside your business. Significant changes in areas like corporate strategy, market conditions, or the development and deployment of intangibles often signal shifts in risk profiles, which tax authorities may scrutinize closely. By proactively updating the master file to capture these shifts, one can ensure it presents a comprehensive and accurate picture of the group’s operations, reducing the likelihood of misinterpretations or disputes.

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6 Engage and collaborate

The sixth and final step to communicate your master file is to engage and collaborate with your internal and external stakeholders, to foster a positive and constructive relationship. The master file is not a one-way communication, but a two-way dialogue that requires mutual understanding, respect, and trust. You should engage and collaborate with your stakeholders throughout the master file process, from preparation to presentation, and solicit their feedback, input, or questions. You should also be proactive, responsive, and transparent in addressing any issues or concerns that may arise, and seek to resolve them amicably and professionally.

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7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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How do you communicate your master file to internal and external stakeholders?

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1 Know your audience

2 Follow the guidelines

3 Use a common language

4 Leverage technology

5 Review and update

6 Engage and collaborate

7 Here’s what else to consider

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