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Last updated on 2024年9月1日

How do you manage the consistency and accuracy of the data in the master file?

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The master file is a key component of the transfer pricing documentation that multinational enterprises (MNEs) need to prepare and maintain to comply with the OECD and local tax authorities' requirements. The master file provides an overview of the MNE's global business, organizational structure, intangible assets, financial activities, and transfer pricing policies. It is intended to be a high-level and consistent source of information for all relevant jurisdictions where the MNE operates. However, managing the consistency and accuracy of the data in the master file can be challenging, especially for large and complex MNEs with multiple sources of data and frequent changes in their business operations. In this article, you will learn some practical tips on how to manage the data quality and reliability of the master file.

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Abhiishhek Bhavsar

Qualified CA | Strategic Advisor in International Tax & Transfer Pricing - India | UAE
Tyas Tatipata

Automates taxes at Deloitte

1 Establish a clear process

The first step to ensure the consistency and accuracy of the data in the master file is to establish a clear and standardized process for collecting, validating, updating, and storing the data. This process should involve the relevant stakeholders from different functions and regions, such as tax, finance, legal, business development, and operations. The process should also define the roles and responsibilities of each stakeholder, the frequency and format of data collection and reporting, the data sources and systems to be used, the quality checks and controls to be applied, and the data security and confidentiality measures to be followed.

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Abhiishhek Bhavsar

Qualified CA | Strategic Advisor in International Tax & Transfer Pricing - India | UAE
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A SOP or say set of SOPs in a very simple and understandable language is/are required to be circulated to the concerned stake holders along-with stating their responsibilities as to how the accurate data will help the MNE group to achieve the objective of keeping in line the transactions aligned with the TP policies.

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2 Use a centralized platform

The second step to ensure the consistency and accuracy of the data in the master file is to use a centralized platform or tool that can facilitate the data management and documentation process. A centralized platform can help to avoid duplication, inconsistency, and errors in the data by providing a single source of truth and a common framework for the master file. A centralized platform can also help to automate and streamline the data collection and reporting process by integrating with other data sources and systems, generating standardized reports and templates, and enabling collaboration and communication among the stakeholders.

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Tyas Tatipata

Automates taxes at Deloitte
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A centralized platform helps a lot, but is super reliable of the data and detail that feeds the platform. You could think of P&L segmentations, allocations, splits which are often not available as these pertain to a specific TP characterizations, that only the TP or Tax teams have knowledge of. This poses challenges when managing TP throughout the year, or after year-end when drafting the Local/Master files. A potential fix is ensuring the tax team has influence in the ERP design and governance. If your source system (such as ERP) does not provide the detail, then alternatively a calculation engine can fix it "after- the-fact". This engine could feed back into the ERP, or right into the centralized platform.

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3 Update the data regularly

The third step to ensure the consistency and accuracy of the data in the master file is to update the data regularly and reflect any changes in the MNE's business operations, structure, or transfer pricing policies. The master file should be updated at least annually or more frequently if there are significant changes that affect the MNE's global value chain, such as mergers and acquisitions, restructurings, new products or services, new markets or customers, new intangible assets or risks, or changes in the regulatory environment. The updates should be based on the latest available data and information from the relevant sources and systems, and should be verified and approved by the appropriate stakeholders.

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4 Review the data periodically

The fourth step to ensure the consistency and accuracy of the data in the master file is to review the data periodically and check for any gaps, discrepancies, or inconsistencies in the data. The review should be conducted by an independent and qualified person or team, such as an internal or external auditor, a tax advisor, or a transfer pricing specialist. The review should also compare the data in the master file with the data in the local files, the financial statements, the tax returns, and other relevant documents or sources, and identify and resolve any differences or issues.

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5 Document the data sources and assumptions

The fifth step to ensure the consistency and accuracy of the data in the master file is to document the data sources and assumptions that are used to prepare and support the master file. The documentation should include the details of the data sources and systems, such as the name, type, location, owner, and access of the data, as well as the date, frequency, and method of data extraction and validation. The documentation should also include the assumptions and methodologies that are used to analyze and interpret the data, such as the benchmarks, comparables, adjustments, or allocations that are applied to the data.

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Tyas Tatipata

Automates taxes at Deloitte
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It's almost a waste to let TP talent (often qualified CPA/LL.M./Msc ) to do these tedious collection tasks, now that the age of AI has started. We are now exploring how AI tools can facilitate chunks of this job

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6 Align the data with the business reality

The sixth and final step to ensure the consistency and accuracy of the data in the master file is to align the data with the business reality and the economic substance of the MNE's transactions and activities. The data in the master file should reflect the actual functions performed, assets used, risks assumed, and value created by each entity or segment of the MNE, and should be consistent with the contractual terms, pricing policies, and market conditions that govern the MNE's intercompany transactions. The data in the master file should also be consistent with the MNE's business strategy, objectives, and performance, and should be able to explain and justify the MNE's transfer pricing outcomes.

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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 manage the consistency and accuracy of the data in the master file?

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1 Establish a clear process

2 Use a centralized platform

3 Update the data regularly

4 Review the data periodically

5 Document the data sources and assumptions

6 Align the data with the business reality

7 Here’s what else to consider

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