Understand Transfer Pricing Master and Local Files
As your company becomes successful and expands, you may have to deal with the concept of transfer pricing. Many people mistakenly think that transferring parts and goods between branches of a company is a relatively simple task. Although they may understand the need to keep separate accounts of the wares at the various branches and charge another branch for transferring them, they don’t see the entire picture or the need for multiple transfer pricing files.
Logically, their price will cover handling and shipping fees, but they’re not looking to profit from another branch in the same company. However, many people never consider the taxation problem of transferring products between countries. Each country has its own tax regulations, compliance requirements, and transfer pricing rules that must be adhered to. Failing to document these transactions properly can lead to financial penalties, increased tax scrutiny, and even legal complications. Having both master and local transfer pricing files ensures transparency, compliance, and accurate reporting, helping companies navigate complex international tax laws efficiently.
Master and Local Transfer Pricing Files
Multinational companies must keep two files. The parent company maintains the master transfer pricing file, which offers an overview of all the company’s inter-branch financial transactions and contains up-to-date descriptions of the company’s global activities, including the geographical locations of the individual branches, the global supply chain, and the individual branch’s business activities.
The master file typically doesn’t include the details of the transactions at the branch level because doing so would not be financially beneficial.
Local Tax Information
Transfer pricing local files are maintained at the company branch level. These files contain all the details of the business activities at the individual branches and supply the data for calculating the branch’s local tax liability.
Well-maintained transfer pricing of local files can help multinational companies with many branches dramatically reduce their tax liability. In some cases, they can also help companies avoid high tariffs.
Additionally, accurate documentation ensures compliance with local tax regulations, reducing the risk of audits and penalties. By maintaining detailed and transparent records, companies can better defend their transfer pricing practices, demonstrate fair market value transactions, and improve overall financial planning and efficiency.
Need for Experienced Local Management
Having an experienced and skilled accounting team in place to manage transfer pricing local files in each country is crucial to maintaining legal tax compliance in the branch countries.
In Thailand, Forvis Mazars offers experienced outsourced accounting teams that know the ins and outs of Thailand’s business tax structure and may reduce your company’s tax liability. They also stay abreast of the latest regulation changes that can affect your tax liability.
They fully comply with the Organization for Economic Development (OECD) policy standards and practices. This means you can be assured that our practices and data will be consistent with those of your parent company and other company branches in OECD member countries.
Streamline Your Supply Chain
Forvis Mazars’s transfer pricing services in Thailand can streamline your supply chain and make it easier to reconcile discrepancies between master and local transfer pricing files.
They can efficiently prepare your Thai tax reports based on your valuation of at least 200 million or 28 billion Thai Baht. For lesser-valued companies, this can include a transfer pricing (TP) disclosure form and a TP report and, for higher-valued companies, a CbCr notification form to accompany the CbCR report filed by your parent company in its home jurisdiction.
