This framework report Local file is typically used to describe the intercompany transactions between a principal and limited risk distributor, with a focus on distributor’s local operations.

In such transactions, the local distributor undertakes the typical sales and marketing functions within a specific region/country in relation to the sale of the products manufactured by the principal, including but not limited to preparation of marketing plans, providing sales forecasts, sales of products and maintaining relationships with customers. The principal company on the other hand sets the strategy for the group, is the owner of the intellectual property of the group and is ultimately responsible for all product development, production, and sales.

The local distributor will only incur limited risks. It obtains the legal title to the products but most of the commercial risks with respect to the products will remain with the principal. Typical risks that are borne by the principal under its relationship with the limited risk distributor are inventory, bad debt and currency risk. The distributor does not undertake entrepreneurial activities which would result in the development of marketing intangibles.

The framework report Local file is set up in line with the latest OECD BEPS requirements (i.e. Action 13) and contains the required content and technical language. The framework report also provides comprehensive guidance (including a very extensive functional analysis questionnaire) enabling you to tailor the framework report to the specific situation of your local group company and where to typically find specific information.