Transfer pricing compliance has come a long way from the days of generic local files and post-audit documentation. What used to be a siloed, defensive process is now a high-stakes, jurisdiction-specific challenge that requires coordination, precision, and a clear narrative across borders. As noted in Financial Services Review, modern tax teams are turning to technology to reduce manual effort and meet these growing demands with greater speed and confidence.
In our recent webinar, we explored how the OECD’s BEPS Action 13 reshaped documentation expectations and how localization has become the most pressing compliance risk for multinational enterprises. While the OECD introduced a global framework, countries have layered on unique requirements that can easily trip up even the most prepared tax teams.
From Reactive Defense to Proactive Transparency
Before BEPS Action 13, documentation was inconsistent and narrow in scope. Companies prepared jurisdiction-specific files to meet local obligations, but there was rarely a global narrative tying the reports together. The documentation was primarily seen as a defense file. Something to produce if an audit came up.
Post-BEPS, documentation is no longer reactive. Authorities expect a proactive, transparent story that answers:
- Where is value actually being created?
- Who develops, enhances, maintains, protects, and exploits IP?
- Does the legal form of the transaction match its economic substance?
This shift introduced the three-tiered structure: master file, local file, and country-by-country report (CbCR). In theory, it created consistency. In practice, it’s more fragmented than ever.
The Problem With “One Size Fits All”
While BEPS aimed to streamline compliance, the reality today is a patchwork of country-specific regulations that vary in thresholds, formats, languages, and expectations. For a detailed look at what’s changed, and where, this Worldwide Transfer Pricing Regulation Guide, 2025 Edition offers jurisdiction-by-jurisdiction insights to help your team stay compliant and audit-ready.
Here’s where companies are facing the most challenges:
Thresholds, Formats, and the Fine Print
Beyond meeting global standards, multinational enterprises must now navigate a web of local thresholds, filing formats, and technical submission rules that can vary dramatically from one jurisdiction to another. In practice, this means understanding where your documentation obligations start (thresholds), how your data must be presented (formats), and in what language or medium tax authorities expect to receive it. Missing any one of these details can turn an otherwise compliant report into a potential audit trigger.
- Thresholds
- CbCR and master file thresholds generally follow the OECD’s 750- million-euro consolidated annual revenue benchmark, but not always.
- Some jurisdictions set lower thresholds or peg them to local currency, which fluctuates and may trigger obligations unexpectedly.
- Formats and Languages
Many tax authorities require documentation to be submitted in their native language or in a prescribed electronic format that differs from the OECD template. These requirements are intended to make audits easier for local authorities but can significantly increase the administrative burden for multinational groups.
Here’s what that looks like in practice:
- The U.S. and U.K. accept narrative reports in Word or PDF.
- Countries like Spain, Portugal, and Colombia require XML schemas or machine-readable formats.
- Ecuador enforces a 16-step structure that must be followed exactly or you risk penalties.
- Local language requirements are increasing. Germany, Brazil, and China may request translated reports during audits, sometimes with just 30 days to comply.
Comparables and Ranges: Another Layer of Localization
Transfer pricing policies may be global, but benchmarking standards often are not. Tax authorities are scrutinizing not just how documentation is prepared, but how comparables and pricing ranges are applied.
- Comparables and Ranges
- Local comparables are strongly preferred in jurisdictions like Poland, Brazil, and India.
- If local data isn’t available, companies must show evidence that broader regional sets were considered only after local options were exhausted.
- Some countries require interquartile ranges (e.g., Mexico), while others permit full range analysis (e.g., CAN).
Audit Risk Has Never Been Higher
Some tax authorities are now interconnected and data-driven. They cross-reference transfer pricing reports with VAT filings, customs declarations, and local tax returns using AI and automated systems. Any inconsistency can be flagged and may lead to an audit that stretches beyond the original jurisdiction.
In many countries, documentation doesn’t need to be submitted annually but must be produced within 30 days upon request. If your reports aren’t ready, and localized to the right threshold, format, and language, you’re already behind.
What Strong Transfer Pricing Documentation Must Do
A good report doesn’t just check a box. It tells a story. During the webinar, one of the key takeaways was that documentation should be easy for a third party to follow, especially someone unfamiliar with the business.
Ask yourself:
- Does the report explain the role of the local entity within the group?
- Are intercompany transactions clearly described and supported by data?
- Does the documentation reflect what actually happened—or just cite policy?
- Are differences between the master file and local files easy to explain?
Why It Matters
Transfer pricing compliance now lives and dies at the local level. Rules shift fast. Formats vary. Penalties and adjustments hit hard.
Localization isn’t a nice-to-have, it’s essential. It’s what separates audit readiness from unnecessary risk.
Want a deeper dive into what’s changing—and how to prepare? Access the full slide presentation from the webinar. Or speak to one of our transfer pricing experts today to discuss how your documentation stacks up against evolving local requirements, and where you might be exposed.
