Transfer Pricing Local File Template (OECD Chapter V Annex II)

Transfer Pricing Local File: [Local entity name] FY[YYYY]

Entity-level transfer pricing documentation (the "local file") for one taxpayer in a multinational enterprise (MNE) group: the local entity and its management, each category of controlled transaction, the functional analysis, method selection, comparables search, arm's length range, adjustments, conclusion and the reconciliation to the local financial statements. Structure follows the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations 2022, Chapter V, Annex II, with a cross-reference to local rules in Vietnam, Germany, the United Kingdom and the United States (as of 2026-10). Replace every [bracketed] value and every row marked Example. This is a document format, not tax, legal, accounting or financial advice. Requirements are referenced by number: obtain the guidelines or the law for the normative text.

Document control

Approvals

Revision history

Contents

• 1. Purpose, scope and legal basis
• 2. Local entity
• 3. Controlled transactions
• 4. Functional, asset and risk analysis
• 5. Method selection
• 6. Tested party and comparables search
• 7. Financial indicators and arm's length range
• 8. Adjustments and segmentation
• 9. Conclusion
• 10. APAs, rulings and disputes
• 11. Cross-reference to OECD Annex II and local rules
• 12. Review log and evidence index
• 13. Glossary and references
• Standard and licence note

1. Purpose, scope and legal basis

1.1 Purpose

This local file documents the controlled transactions of [Local entity] with associated enterprises for [YYYY], explains how they were priced, and demonstrates that the results are consistent with the arm's length principle. It supports the corporate income tax return and the related party disclosures for the year.

Example: Ostrander Vietnam Co., Ltd provides software development services to its parent and resells a small volume of point-of-sale hardware bought from the parent. Both flows are controlled transactions. The file shows that the development segment earned a net cost plus of 8.0%, inside the interquartile range of comparable independent service providers, and that the resale segment earned an operating margin inside its own range.

1.2 Local requirements (as of 2026-10)

Check local law: thresholds, deadlines and forms change.

1.3 Exemption and scope test

Check: 131,640 x 28,500 = 3,751,740,000 thousand VND = VND 3,751,740m (about VND 3,751.7bn).

Use the exchange rate the local rule specifies for the test (for example the rate used in the statutory accounts). If revenue sits close to a threshold, document the rate source, because a different rate can change the result.

2. Local entity

2.1 Management structure and reporting lines

2.2 Business and strategy

Example: OST-VN was set up in 2021 in Ho Chi Minh City as the group's main engineering centre. At the end of FY2026 it employed 2,900 people, of whom 2,850 were engineers, testers and designers. Its strategy for 2027 is to add about 300 engineers while keeping cost per full-time equivalent below the group target set in the annual budget. A team of 40 resells point-of-sale hardware to Vietnamese merchants who use the Ostrander platform.

2.3 Restructurings and transfers of intangibles

Example: On 2026-04-01 40 engineering roles moved from OST-NL to OST-VN (master file CHG-001 and RST-001). The roles perform development under the existing services agreement. No intangible, customer list or decision-making function moved, so no compensation for a transfer arose.

2.4 Key competitors

List the main competitors in each activity. Example: For development services, independent software outsourcing firms in Vietnam and the region compete for the same engineers and clients. For resale, local resellers of point-of-sale hardware compete on price and delivery time.

3. Controlled transactions

3.1 Transactions by category

Check: 116,640 x 28.5 = 3,324,240; 12,000 x 28.5 = 342,000; 1,500 x 28.5 = 42,750 (VND million at VND 28,500 per EUR).

3.2 Intercompany agreements

Attach copies. Where conduct differs from the written terms, describe the actual conduct, because the accurate delineation of a transaction follows what the parties actually do.

3.3 Intercompany balances at year end

4. Functional, asset and risk analysis

4.1 Functions

4.2 Assets

Example: OST-VN uses office leases, laptops, test devices and servers (tangible assets of EUR 18,000k net book value at year end) and an experienced workforce. It does not own intangibles: code, designs and documentation it produces belong to OST-NL under AGR-001. For resale it holds a small hardware stock (average EUR 1,500k).

4.3 Risks

Apply the six-step process for analysing risk in Chapter I of the OECD Guidelines: identify the economically significant risks, map contractual allocation, determine which party performs control functions and has the financial capacity, check whether conduct matches contract, and allocate risk to the party that controls it.

4.4 Characterisation

Example: For CT-001, OST-VN is a contract software service provider: it performs routine development under the direction of OST-NL, owns no intangibles and bears limited risk. For CT-002, it is a limited-risk reseller. OST-NL is the entrepreneur that controls development and market risks and owns the platform.

5. Method selection

The OECD Guidelines (Chapter II) describe five methods: comparable uncontrolled price (CUP), resale price, cost plus, transactional net margin method (TNMM) and transactional profit split. Select the most appropriate method for each category and record the reasons for rejecting the others.

For CT-002 (resale), TNMM with operating margin on sales was selected for the same reasons; for CT-003 (group services), the cost-plus charge under the low value-adding services approach is tested in the provider's file and checked here for the benefit test (the services are actually received and would be paid for by an independent company).

6. Tested party and comparables search

6.1 Tested party

Example: OST-VN is the tested party for CT-001 and CT-002: its functions are simpler and better documented than those of OST-NL, and independent companies with similar functions can be found.

6.2 Search strategy

Follow the local order of priority for data sources and comparables. Under Decree 255/2026/ND-CP, public and official sources come before commercial databases and tax authority data, and internal comparables come before domestic ones, which come before regional ones. Confirm the exact order in the decree text.

6.3 Domestic first, then regional

Example: The domestic search accepted 2 Vietnamese companies, too few to form a reliable range. The search was extended to the Asia-Pacific region (Malaysia, Thailand, the Philippines, Indonesia, India), which accepted 9 more. Country risk differences were considered and found not to require an adjustment, because the accepted companies serve export clients on similar terms.

6.4 Accept and reject matrix

Keep a full list of companies reviewed at step S-06 with the reason for each rejection (for example "own software products above 20% of revenue", "mainly hardware trading", "insufficient segment information"). Store it in the evidence index (section 12), not in the body of this file.

7. Financial indicators and arm's length range

7.1 Profit level indicator

For CT-001 the indicator is the net cost plus (NCP): operating profit as a share of total operating costs.

Total operating costs include cost of services, personnel, depreciation, office and IT costs and group service charges, and exclude interest, foreign exchange results, income tax and extraordinary items. Apply the same definition to the comparables.

7.2 Comparables results

Weighted average NCP over FY2023 to FY2025 (the latest three years available at the extraction date):

Arithmetic mean: 94.4 / 11 = 8.58%.

7.3 Interquartile range

Two common conventions give slightly different quartiles. State which one the local rule requires; if it is silent, state the convention used and apply it consistently every year.

Linear interpolation (spreadsheet inclusive quartile convention). For $n$ sorted results $x_{(1)} \le \dots \le x_{(n)}$ and percentile $p$, compute the position $h = 1 + p(n - 1)$, take $k$ as the integer part of $h$, and

With $n = 11$:

US regulation convention (Treas. Reg. 1.482-1(e)(2)(iii)(C)): the 25th percentile is the lowest result such that at least 25% of results are at or below it (averaged with the next result if exactly 25%), and likewise for the 75th and 50th. With 11 results, 25% of 11 is 2.75, so the 3rd result (6.0%); 75% of 11 is 8.25, so the 9th result (10.6%); 50% of 11 is 5.5, so the 6th result (8.2%).

Vietnam applies its own percentile band and adjustment point. Decree 132/2020/ND-CP used the 35th to 75th percentile, with adjustment to the median; confirm whether Decree 255/2026/ND-CP keeps this, and recompute the range on that basis before finalising the file. Example: the 35th percentile by linear interpolation is at position 1 + 0.35 x 10 = 4.5, so 6.8 + 0.5 x (7.4 - 6.8) = 7.10%.

7.4 Tested party result

Check: 86,400 + 12,800 + 7,300 + 1,500 = 108,000; 116,640 - 108,000 = 8,640; 8,640 / 108,000 = 8.00%.

The NCP of 8.00% lies inside both versions of the interquartile range (6.40% to 10.25%, and 6.00% to 10.60%) and inside the 35th to 75th percentile band (7.10% to 10.25%), slightly below the median of 8.20%.

7.5 Sensitivity

Example: Had the fee been set at cost plus 5% (fee EUR 113,400k, NCP 5.00%), the result would sit below the lower quartile under both conventions. If the tax authority adjusted to the median of 8.20%, the adjustment would be 108,000 x (8.20% - 5.00%) = EUR 3,456k of additional taxable income in Vietnam (about EUR 346k of tax at OST-VN's 10% preferential rate, before interest and penalties; check whether the incentive covers an adjustment), with a risk of double taxation unless the Netherlands grants a corresponding adjustment. This shows why the year-end true-up in TPP-002 matters.

8. Adjustments and segmentation

8.1 Segmented income statement

Check: 15,000 - 12,000 - 2,250 = 750; 750 / 15,000 = 5.00%; 8,640 + 750 = 9,390; 131,640 - 12,000 - 110,250 = 9,390.

Allocation keys: personnel by time records; office costs by floor space; group service charge to the development segment because the services support the engineering workforce. Example: The resale segment was tested against a separate set of independent distributors of electronic equipment (interquartile range 2.6% to 5.4%, median 3.9% Example); its operating margin of 5.00% is inside the range.

8.2 Comparability adjustments

8.3 Year-end adjustments

Example: Monthly invoices in FY2026 were based on budgeted costs of EUR 105,000k plus 8% (EUR 113,400k). Actual costs were EUR 108,000k, so a true-up invoice of EUR 3,240k was raised in December 2026: 108,000 x 1.08 = 116,640; 116,640 - 113,400 = 3,240. Record the invoice date and confirm that it was booked in the same financial year and in both entities.

9. Conclusion

Example: Based on the analysis above, the controlled transactions of Ostrander Vietnam Co., Ltd in FY2026 are consistent with the arm's length principle, and no adjustment to taxable income is required.

10. APAs, rulings and disputes

11. Cross-reference to OECD Annex II and local rules

11.1 OECD Annex II items

11.2 US principal documents (Treas. Reg. 1.6662-6(d)(2)(iii)(B))

Use this table when the entity, or a US counterparty, relies on the file for penalty protection.

11.3 Local add-ons

12. Review log and evidence index

Post-year-end data: record events after year end and before filing that affect the analysis (for example a comparable acquired by a group, which removes its independence). Example: None identified.

13. Glossary and references

13.1 Glossary

13.2 References

Standard and licence note

Structure aligned with the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations 2022, Chapter V, Annex II (OECD, used for structure and references only under the OECD terms and conditions; OECD material published from 2024-07-01 is available under CC BY 4.0). This is an adaptation in original wording; it does not represent the official views of the OECD or its Member countries. The jurisdiction rows and the US interquartile convention are based on public law: Vietnam Decree 255/2026/ND-CP, German section 90 AO with the GAufzV, UK SI 2023/818 (Open Government Licence v3.0) and US Treas. Reg. 1.6662-6 and 1.482-1 (US public domain), paraphrased in original words. Ostrander Group N.V., its subsidiaries, the comparables and every figure are fictional. This template is original text written for this collection. Check the current official versions of the guidelines and each local law before use. Template licence: MIT.