Plain English
A transfer pricing study is the underlying technical work product, often prepared by an advisor, that a local file draws on or incorporates. It typically covers the functional analysis, the choice of method, the comparable search and the resulting range. Some groups treat 'study' and 'local file' as interchangeable; more precisely, the study is the economic analysis, and the local file is the fuller compliance document that wraps it with business description and legal context.
Technical definition
A discrete economic and functional analysis, prepared for a specific controlled transaction or category of transactions, that documents the accurate delineation of the transaction, the selection of the most appropriate transfer pricing method, the comparable search methodology and results, and the resulting arm's length range or point, typically forming the analytical core of a jurisdiction's local file requirement.
Why it matters
It is the piece of work that actually generates defensible evidence — everything else in a compliance package (business descriptions, org charts) supports and contextualises what the study concludes.
How it works in practice
- 01Scope the transaction(s) and tested party.
- 02Conduct the functional analysis: functions, assets, risks.
- 03Select the most appropriate method given the facts.
- 04Search a commercial database for comparable companies or transactions.
- 05Apply comparability adjustments and derive the arm's length range.
- 06Conclude on whether tested results fall within range, or recommend a target.
Worked example
A TNMM-based study for a shared service centre
An advisor is commissioned to prepare a transfer pricing study for a Polish shared service centre providing IT support to group entities across Europe. The study identifies the entity as a low-risk service provider, selects TNMM with operating margin on total costs as the profit level indicator, and searches the Amadeus database for comparable European IT support companies, arriving at an interquartile range of 4.5% to 7.8% after working capital adjustments. The Polish entity's actual margin of 5.9% falls comfortably within range, and the study concludes no adjustment is needed — a conclusion the group then references directly in its Polish local file.
Common mistakes
- Commissioning a study once and reusing its comparables set for five years without refresh.
- Selecting a method to match a desired margin rather than letting the functional analysis drive method choice.
- Treating the study as a compliance artifact rather than genuine economic evidence, weakening it on audit.
Audit red flags
- Studies with no documented rejection matrix for excluded comparables.
- A tested party whose functional profile in the study contradicts the local file narrative.
- Studies commissioned only after an audit notice arrives.
Documentation & data
Documents to hold
- The study report itself, including methodology and search strategy.
- Underlying database search outputs and rejection matrix.
- Financial data used for the tested party and comparables.
Data you need
- Segmented financials for the tested party.
- Access to a commercial comparables database appropriate to the region.
- Functional interviews or questionnaires with relevant business stakeholders.
Who owns this internally: External advisor typically drafts it; in-house tax reviews, owns, and integrates it into the local file.
Jurisdiction notes
- General practice
- Most jurisdictions expect the multi-year refresh cycle for benchmarking searches to be three years, with annual financial updates in between.
- Limited-database regions
- Some emerging markets lack robust local comparable data, requiring use of regional or pan-Asian/pan-EMEA search sets with additional comparability adjustments.
Notes by role
Advisors & consultants
The rejection matrix is often what auditors scrutinise most closely — document why comparables were excluded, not just why the final set was included.
In-house tax teams
Insist that any commissioned study includes management interviews, not just a desk-based database exercise — it is the functional detail that holds up on audit.
Frequently asked
- Is a transfer pricing study the same as a local file?
- Not exactly — the study is the economic analysis; the local file is the fuller documentation package that incorporates the study alongside business and legal context.
- How often should a study be refreshed?
- Comparable searches are commonly refreshed every three years, with financial data updated annually in between, though local rules vary.
Sources & status
- Primary source
OECD Transfer Pricing Guidelines, Chapters I-III
OECD, 2022
- Our interpretation
Study versus local file distinction
This glossary, 2026
Reference material only, not advice on a specific fact pattern. Reviewed 2026-06-30.
Careers
How this shows up in the job
Drafting transfer pricing studies is core advisory-track work and the fastest way to build hands-on benchmarking database experience.
Careers in transfer pricing