Master file vs local file
The master file describes the group; the local file describes one entity's transactions. The master file is read in every country the group operates in.
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The master file describes the group; the local file describes one entity's transactions. The master file is read in every country the group operates in.
Side by side
| Master file | Local file | |
|---|---|---|
| Scope | The whole multinational group | One entity and its controlled transactions |
| Content | Structure, value drivers, intangibles, financing | Functional analysis, method, comparables, results |
| Author | Usually the parent | Usually local, with group input |
| Risk | Inconsistency with a local file | A result outside the tested range |
| Who reads it | Every authority in the footprint | The local auditor, line by line |
Which one applies to you
Both, where the thresholds are met — and reconcile them before filing. The most avoidable transfer-pricing finding is a local file that contradicts the group's own description of where value is created.
How to get this moving
We will tell you if you do not need us. That happens more often than you would expect.
Read and approved for the 2025 and 2026 filing seasons by Udit Gupta, Cross-Border Tax Expert, Legal Quotient Consultants. Published as general information. For a position on your own file, call the 24-hour helpline.
Master international tax — what this page covers
Readers arrive here searching for master international tax, and master file vs local file is what the page is about. Below: who it catches, what has to be filed, and what it costs — quoted in writing, before anything is done.
What working with us on master file vs local file looks like
4 global offices
Meet us in person in India, the USA, Canada and the UAE, or send everything through the secure portal — the same process either way.
Every figure on a page is traceable
Where a rate or a threshold appears in our writing it names the tax year it belongs to. Where it could not be confirmed, the page describes the mechanism and quotes no number.
Filed with the authority, not just prepared
The engagement runs to submission and to the correspondence that follows it, including the queries that arrive months later.
The reporting penalties get named early
The heaviest exposure on a cross-border file is usually a disclosure form, not the tax. We identify which ones apply before a deadline turns into a penalty.
Cross-border tax case studies
Local file reconciled with a master file it had contradicted
The group's master file described the local entity as carrying limited functions, while the local file's functional analysis gave it a much fuller role, including decisions the master file placed at head office. Both had been filed. We set the two documents side by side, established which description matched what the entity actually did, and rewrote the analysis to fit the facts rather than either draft. The engagement produced a corrected local file, a note to the group recording where the master file needs amending, and a reconciliation memorandum kept with both documents.
Functional analysis rebuilt from interviews rather than last year's file
The documentation had been rolled forward for several cycles, each year copying the previous functional description while the business changed underneath it. We interviewed the people who actually perform the functions, traced the decisions to where they are taken, and rebuilt the analysis from what we found. Some of it matched the old file and a good part did not. The engagement produced a functional analysis grounded in evidence, a revised method selection that followed from it, and a record of the interviews, so next year's file can be updated rather than copied.
Preparing a first local file after a group restructuring
The group had moved intangible ownership and changed how it financed its subsidiaries, and the local entity had to document a year that looked nothing like the one before it. We took the new master file as the starting point, established how the restructured arrangements applied to this entity, and built the transactions, the method and the comparables around them. The engagement produced the entity's first local file on the new structure, a mapping of the changes against the group narrative, and a list of the points a local auditor is most likely to open with.
Intercompany financing documented consistently in both files
The group's loans to the local entity were described in the master file in general terms, while the local file tested them using an approach that did not match that description. An auditor reading both would have found two accounts of one arrangement. We established the actual terms, the entity's credit position and what the group's financing policy says it does, then documented the transaction once and used that single description in both places. The engagement produced the supporting analysis, the amended local file section, and the wording the group adopted for its own document.
Answering an enquiry opened on the documentation alone
No adjustment had been proposed. The authority had read the two documents, found the descriptions inconsistent, and asked. The value of the engagement lay in not making it worse. We established which document was right on each point, prepared the response with the evidence behind the correct version, and conceded the drafting error where there was one. The engagement produced a filed response, a corrected local file for the year, and a change to the group's preparation timetable so that the two documents are reconciled before either is filed again.
Deciding which entities in the footprint needed a local file
The group had been preparing full documentation for every entity regardless of whether the local thresholds were met, and preparing none at all where the requirement was less familiar. We went country by country through the footprint, established where documentation was required and where it was not, and set out what the master file had to cover for each. The engagement produced a documentation map for the group, a priority order for the files that were genuinely missing, and the reasoning recorded so the assessment can be refreshed rather than redone.
Residency Changed Mid-Year and Both Returns Assumed a Full One
A move part-way through a year produces two part-year positions, not two full ones. The engagement establishes the date residence actually changed, allocates income either side of it, and amends whichever return was filed on the wrong footing.
Read how this one runsComing Back to Canada After Years Abroad
Returning restarts Canadian residence and re-values what you own on the day you arrive. Foreign pensions, employer plans and accounts opened abroad each land differently, and the reporting thresholds are tested against the whole portfolio rather than each account.
Read how this one runsAll case studies — every published engagement in one place.
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Holding structures live or die on treaty access, beneficial ownership and substance — the MLI's principal-purpose test now sits over every arrangement.
A holding structure is only as good as its reporting. Foreign affiliates, accrued passive income and distributions each carry their own return, and the penalties on those attach to the form rather than to any tax being owed — so a structure that saves tax can still cost money if the information returns are late.
- Treaty access & PPT reviews
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