BEPS Action 13: The Three-Tier Documentation Standard

Definition

BEPS Action 13 is the OECD/G20 BEPS project’s action on transfer pricing documentation and country-by-country reporting — the three-tier documentation standard that the 2015 revised OECD Guidelines carry, and that the jurisdictions (India included) implemented in their local rules. The three tiers, in one map:

The tier	The content	The standard (the OECD’s)	The India implementation
The Master File	The group-level document — the group structure, the intangibles, the financial transactions, the TP policy, the financials	The MNE group with the consolidated revenue above the threshold (the OECD’s €750m; the Indian Rule 10DA’s ₹1,000 cr) — the Master File	Rule 10DA (the ₹1,000 cr aggregate group revenue)
The Local File	The entity-level document — the entity profile, the FAR, the related party transactions, the benchmarking, the method	The in-scope entity (the local threshold) — the Local File, prepared contemporaneously	Rule 10D (the ₹300 cr aggregate transaction value; the 30-day preparation window)
The CbCR	The country-by-country report — the per-jurisdiction revenue, profit, tax, employees, tangible assets	The MNE group with the consolidated revenue above the threshold (the €750m) — the CbCR, the exchange via the competent authorities	Rule 10DB (the ₹1,000 cr consolidated group revenue; the Form 3CEB / 3CEBA)

The design principle (the BEPS initiative guide and the documentation guide): the three tiers separate the group (the Master File — the structure, the intangibles, the policy), the entity (the Local File — the FAR, the benchmarking, the method), and the jurisdictional allocation (the CbCR — the revenue/profit/tax per jurisdiction). The tiers are complementary (each carries what the others do not) and cross-referenced (the entity’s Local File references the group’s Master File; the CbCR’s jurisdictional totals reconcile to the entities’ files). The contemporaneity requirement (the Local File prepared as the transactions happen, not after) is Action 13’s enforcement mechanism — the documentation the penalty protection (the penalty protection) runs on.

Example

The MNE group (the consolidated revenue ₹5,000 cr, above both thresholds) in India: the Master File (the Rule 10DA — the group structure, the intangibles, the financial transactions, the TP policy) maintained by the designated Indian entity; the Local File (the Rule 10D — the entity profile, the FAR, the related party transactions, the TNMM benchmarking, the method) prepared within the 30-day window for each in-scope Indian entity (the aggregate transaction value above ₹300 cr); the CbCR (the Rule 10DB — the per-jurisdiction revenue, profit, tax, employees, tangible assets) filed with the return (the Form 3CEB / 3CEBA). The three tiers, cross-referenced: the Local File’s entity profile references the Master File’s group structure; the CbCR’s Indian totals reconcile to the entities’ Local Files. The compliance calendar has the deadlines.

See also

• The BEPS Initiative (the guide)
• CbCR · Master File (Rule 10DA) · Local File (Rule 10D)
• TP Documentation Guide

FAQ

What changed with Action 13 — what was the standard before? Before Action 13 (the pre-2015 guidelines), the documentation was the entity-level file (the local documentation, the benchmarking, the method) — the group-level Master File and the CbCR did not exist as OECD standards. Action 13 added the two tiers (the Master File, the CbCR) to the existing local documentation, and imposed the contemporaneity requirement on the Local File. The three-tier structure (group / entity / jurisdiction) is Action 13’s contribution — the framework the jurisdictions implemented (India’s Rule 10DA / 10D / 10DB, the thresholds localised).

Do all three tiers apply to every MNE? No — the thresholds gate them: the Master File and the CbCR apply at the group threshold (the consolidated revenue above the OECD’s €750m / the Indian ₹1,000 cr); the Local File applies at the entity threshold (the in-scope entity, the local transaction-value threshold — the Indian ₹300 cr). The group below the group threshold carries the Local File (where the entity threshold is met) without the Master File / the CbCR; the group above carries all three. The jurisdiction comparison has the thresholds per jurisdiction.

How does Action 13 interact with the penalty protection? The contemporaneity is the link: Action 13 requires the Local File prepared as the transactions happen (the contemporaneous standard), and the penalty protection (the penalty protection — the Indian s.271AA block, the 282BC production) runs on the contemporaneous documentation being in place and produced. The documentation that is not contemporaneous (assembled after the notice) loses the protection — the penalty becomes available. Action 13’s design (the contemporaneous three tiers) is what the penalty regime enforces.