Step 4 – Local File

6 steps to TP without (active) repentance

Once the benchmark studies or compliance descriptions have been produced, a Local File comprising a description of transactions plus the data already provided in the TPR and results of the benchmarking studies/compliance descriptions will need to be prepared. We will highlight all the important issues to pay attention to during this work and, if necessary, prepare a set of analyses for you.

The Local File is a kind of narrative of the transaction and the parties involved and should show the background, i.e. the economic reasons for the transaction, and essential facts about the transaction. When preparing the Local File, it should be borne in mind that the recipients, i.e. the tax authorities, may not be industry specialists or even understand the transaction itself. In addition, a description of the functional profile of the parties to the transaction should identify the key functions, assets and risks of the transaction. Detailing every action in a transaction or copying the agreement entered into by the parties is lengthy and obscures the transaction and the roles of the parties involved. As a result, the tax authority, when examining the Local File, may need to ask additional questions and may not find the documentation reliable.

In addition to the transaction, the company will also have to be described: its business characteristics and business strategy, the industry and the economic environment. In its audit, the tax authority will analyse your business profile and how the given transaction fits into it, and examine whether the transaction was necessary from a business perspective.

How we can assist

Our support includes:

  • preparation of the Local File for your transactions;
  • review of your Local File to identify areas of risk.

Related services:

Tax Practice