In the context of increasingly developing cross-border business activities, multinational corporations face greater demands for transparency in determining and explaining pricing policies between related parties. This is also why the Master File Transfer Pricing has become one of the important documents in the international standard system for determining transfer pricing.
More than just a document for tax compliance purposes, the Master File Transfer Pricing provides tax authorities with a comprehensive overview of the group's operational model, value chain, business strategy, and profit allocation methods. For businesses with related-party transactions, understanding the structure, content, and proper construction of the Master File is crucial to mitigating risks during tax audits and inspections.
In 2026, as the mechanism for managing related-party transactions in Vietnam continues to be strengthened in line with OECD and BEPS guidelines, businesses need to proactively standardize their documentation, ensuring consistency between the Master File, Local File, and related documents.
What is Master File Transfer Pricing?
Master File Transfer Pricing (also known as MasterFile global profileThis document provides an overview of the business operations, organizational structure, transfer pricing policies, and profit allocation strategies of a multinational corporation.
Unlike Local File, which focuses on specific transactions occurring at each member company, Master File Transfer Pricing reflects the overall picture at the corporate level, helping tax authorities understand:
- How is the corporation organized and operated?;
- What role do member companies play in the value chain?;
- How are key resources allocated?;
- What principles are related-party transaction pricing policies based on?.
In other words, if Local File answers the question: How is a business in a country conducting related-party transactions?, then Master File Transfer Pricing explains how the entire corporation is creating value and distributing profits across countries.
Master File Transfer Pricing in OECD and BEPS standards
The introduction of Master File Transfer Pricing is closely linked to the Base Erosion and Profit Shifting (BEPS) program implemented by the OECD and G20.
Specifically, BEPS Action 13 calls for increased transparency of information through a three-tiered profile model:
- Local File – Related party transaction records for each country.
- Master File – The overall corporate profile.
- Country-by-Country Report (CbCR) – Country-by-Country Profit Report.
The goal of this mechanism is to help tax authorities assess whether profits are being allocated appropriately to activities that generate actual value.
Therefore, Master File Transfer Pricing is not simply a description of the business, but also reflects the relationship between the functions, assets, risks, and business results of the units within the group.
The role of MasterFile Transfer Pricing for businesses with related-party transactions.
More than just a document to meet compliance requirements for related-party transaction records, Master File Transfer Pricing plays a crucial role in helping businesses build a foundation for accountability, control tax risks, and enhance transparency in cross-border operational management. Specifically, the value that Master File Transfer Pricing brings is demonstrated through the following aspects:
Support in demonstrating the reasonableness of the transfer pricing policy.
One of the most important objectives of Master File Transfer Pricing is to provide a basis for explaining pricing policies between affiliated parties.
For example, in a conglomerate with a parent company abroad and a subsidiary in Vietnam, the tax authorities may be interested in issues such as:
- Why are profits allocated to each company?
- Which company is responsible for performing this crucial function?
- Which companies own intangible assets?
- How are business risks divided?
Master File Transfer Pricing helps businesses systematically present these elements, thereby demonstrating that transactions are executed according to the Arm's Length Principle.
Reducing the risk of cross-border tax disputes.
For corporations operating in multiple countries, the same transaction may be subject to assessment by different tax authorities.
Without a proper documentation system, businesses may encounter the following situations:
- One country believes that profits should be recognized more fully;
- Other countries argue that the company is allocating profits inappropriately.
Master File Transfer Pricing helps create consistency in the interpretation of business models, reducing the risk of disputes over tax rights between countries.
Enhancing tax risk management capabilities
In addition to compliance purposes, Master File Transfer Pricing also provides internal management value.
Through the profile building process, businesses can:
- Review the operating model;
- Identify high-risk transactions;
- Review the appropriateness of the pricing policy;
- Identifying points of disagreement among member companies.
This is why many large corporations view Master File Transfer Pricing as a strategic management tool rather than just a legal requirement.
What does Master File Transfer Pricing include?
According to OECD international practice, a Master File Transfer Pricing document typically includes the following key information groups:
Organizational structure and operating model of the corporation
This section provides an overview of the corporation, including:
- Organizational chart;
- List of member companies;
- Country of operation;
- The ownership relationship between the entities.
This information helps tax authorities determine the position of each business within the entire system.
Description of global business operations
The document illustrates how the corporation creates value through:
- Supply chain;
- Production activities;
- Distribution activities;
- Internal services;
- Research and development activities.
In particular, businesses need to clarify the key functions that generate profit within the corporation.
Related party pricing policy
This is the central content of Master File Transfer Pricing. Businesses need to describe:
- Principles of price setting;
- Methods for determining transfer pricing;
- Basis for method selection.
05 Methods are specified in Decree 132/2020/ND-CP:
- The method of comparing prices of independent transactions;
- Resale price method;
- Cost plus profit method;
- Profitability comparison method;
- Profit allocation method.
Clearly stating the policy helps demonstrate that transactions between related parties are based on sound economic principles.
Intangible assets in a corporation
Intangible assets are a topic of particular interest to tax authorities. Master File Transfer Pricing needs clarification on the following:
- Who owns intangible assets?;
- Who will bear the development costs?;
- Who exploits the commercial value?;
- How are economic benefits distributed?.
Assets may include:
- Trademark;
- Technology;
- Software;
- Business secrets;
- Intellectual property rights.
See also: Details of the Master File content according to Decree 132.
Which businesses should be interested in Master File Transfer Pricing?
Not all businesses need to create a Master File Transfer Pricing system; however, the following groups of businesses should pay particular attention:
Businesses belonging to multinational corporations
This is the most common group that generates the need for Master File Transfer Pricing.
For example:
- The parent company is located overseas;
- The subsidiary in Vietnam engages in manufacturing, distribution, or service provision.;
- The units within the group engage in transactions involving buying and selling, borrowing capital, transferring technology, or using internal brands.
In this case, the Master File helps explain the relationship between member companies and how the corporation allocates profits.
Businesses with cross-border related-party transactions.
Transactions such as:
- Purchase raw materials from affiliated companies abroad;
- Selling products to companies within the same group;
- Payment of internal service fees;
- Pay royalties and technology fees;
- Borrowing or lending between related parties;
Both can give rise to requests for transfer pricing analysis.
In that context, Master File Transfer Pricing is a crucial document for demonstrating the economic basis of internal policies.
The difference between Local File and Master File Transfer Pricing
In a linked transaction record system, the Master File and Local File are two documents that complement each other but are not interchangeable.
| Criteria | Master File | Local File |
| Scope | The entire group | specific businesses |
| Target | Explaining the global business model | Analysis of related-party transactions arising within the business. |
| Information level | Corporate level | The business has transactions with related parties. |
| Content | Organizational structure, value chain, pricing policy | Analysis of functions, assets, risks, and valuation methods. |
| Target users | Tax authorities in many countries | Local tax authority |
Simply put:
- Master File Transfer Pricing answers the question: "How does a corporation create value and allocate profits?"“
- Local File answers the question: "How do businesses in that country conduct related-party transactions?"“
Both documents need to be consistent. Differences between the Master File and the Local File can become a focus of tax authorities' scrutiny.
See details: Comparing Master Files and Local Files.
Common mistakes when creating Master File Transfer Pricing
Although Master File Transfer Pricing plays a crucial role in demonstrating the transparency and appropriateness of transfer pricing policies, many businesses still struggle with the documentation process. These errors not only affect the quality of the documentation but can also increase the risk of tax audits. Several common mistakes businesses should pay particular attention to.
The contents of the Master File are inconsistent with those of the Local File.
This is a common mistake in many businesses. For example:
- Master File describes the Vietnamese company as a simple manufacturing unit;
- But Local Files show that the business is involved in many value-creating activities.
This discrepancy could lead tax authorities to question the accuracy of the records.
Ignoring the role of intangible assets
Many businesses focus solely on trading commodities but fail to fully evaluate the following factors:
- Trademark;
- Technology;
- Business processes;
- Customer data.
In transfer pricing management, intangible assets often have a significant impact on profit allocation.
The profile was not updated to reflect changes in activity.
A Master File Transfer Pricing document created many years ago but not updated may no longer accurately reflect the current business model. This reduces its value in explaining the situation during a tax audit.
Creating a Master File Transfer Pricing document involves more than just compiling administrative information; it requires a comprehensive analysis of the group's business operations. Therefore, businesses should consult relevant resources. related party transaction documentation service We seek support from specialized and experienced units to review data, perform FAR functional analysis, build profiles compliant with current regulations, and ensure consistency between the Master File, Local File, and related documents.
What preparations do businesses need to make to meet the Master File Transfer Pricing requirements in 2026?
To proactively comply, businesses should establish a process for managing related-party transaction records, including:
- Review any related-party transactions that have occurred;
- Determine the relationship between the parties as stipulated;
- Collect financial and operational data;
- Perform FAR functional analysis;
- Review the appropriateness of the pricing policy;
- Ensure that the Master File Transfer Pricing and Local File are consistent.
Early preparation helps businesses avoid being caught off guard when they receive requests for documents from the tax authorities.
To proactively comply, businesses should establish a process for managing related-party transaction records, including steps for transaction review, risk assessment, data standardization, and regular record updates. In cases where a business does not have a team specializing in transfer pricing, hire someone to prepare related party transaction documents. This can help ensure that the file is properly structured, minimize errors during explanations to the tax authorities, and improve the ability to meet audit requirements.
Frequently Asked Questions about Master File Transfer Pricing
Master File Transfer Pricing is a comprehensive document that describes the operating model, organizational structure, transfer pricing policy, and profit allocation strategy of a multinational corporation.
Master File focuses on corporate-level information, while Local File provides a detailed analysis of related-party transactions for each business within a given country.
Typically, the parent company or the corporate tax department will collaborate in creating the Master File, and then provide it to subsidiary companies in each country.
No. The obligation to file depends on whether the business falls under the category subject to regulations on managing related-party transactions.What is Master File Transfer Pricing?
How does a Master File differ from a Local File?
Who is typically responsible for preparing Master File Transfer Pricing?
Is MasterFile Transfer Pricing mandatory for all businesses with related-party transactions?
Conclude
Master File Transfer Pricing is not only a requirement in the related-party transaction documentation system but also a tool that helps businesses manage tax risks, enhance transparency, and ensure consistency in cross-border operations.
In the context of Vietnam's tax authorities increasingly scrutinizing related-party transactions, businesses need to proactively develop and update Master File Transfer Pricing to suit their actual business model.
Proper documentation preparation from the outset will help businesses improve their accountability, minimize tax disputes, and ensure compliance with international transfer pricing standards.
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Responsible for production and professional content review by: Grandfather Le Hoang Tuyen – Founder & CEO of MAN – Master Accountant Network. He is a CPA Vietnam auditor with over 30 years of in-depth experience in accounting, auditing, taxation, and corporate legal consulting.