Exchange of information

Country-by-Country reporting

 

Overview | CbC Implementation Exchange of CbC Reports | Guidance & Handbooks | Peer review News | Further information

The Base Erosion and Profit Shifting (BEPS) Action Plan adopted by the OECD and G20 countries in 2013 recognised that enhancing transparency for tax administrations by providing them with adequate information to assess high-level transfer pricing and other BEPS-related risks is a crucial aspect for tackling the BEPS problem.

 

Overview

The BEPS Action 13 report (Transfer Pricing Documentation and Country-by-Country Reporting) provides a template for multinational enterprises (MNEs) to report annually and for each tax jurisdiction in which they do business the information set out therein. This report is called the Country-by-Country (CbC) Report.

To facilitate the implementation of the CbC Reporting standard, the BEPS Action 13 report includes a CbC Reporting Implementation Package which consists of (i) model legislation which could be used by countries to require the ultimate parent entity of an MNE group to file the CbC Report in its jurisdiction of residence including backup filing requirements and (ii) three model Competent Authority Agreements that could be used to facilitate implementation of the exchange of CbC Reports, respectively based on the:

  1. Multilateral Convention on Administrative Assistance in Tax Matters;
  2. Bilateral tax conventions; and
  3. Tax Information Exchange Agreements (TIEAs).
 

CBC REPORTING IMPLEMENTATION

The Inclusive Framework on BEPS has released information on the current status of implementation of CbC reporting around the world. This includes an update on the implementation of the domestic legal framework for CbC Reporting in jurisdictions; on jurisdictions that will permit surrogate filing and voluntary parent surrogate filing; on steps that are being taken to address concerns about local filing being applied before the end of 2017; and on the international exchange relationships that are currently in place for exchanging CbC Reports.

Key information

 

international Exchange of country-by-country reports

The Convention on Mutual Administrative Assistance in Tax Matters (the "Convention"), by virtue of its Article 6, requires the Competent Authorities of the Parties to the Convention to mutually agree on the scope of the automatic exchange of information and the procedure to be complied with. Against that background, the Multilateral Competent Authority Agreement on the Exchange of CbC Reports (the "CbC MCAA") has been developed, based on the Convention. In addition, two further model competent authority agreements have been developed for exchanges of CbC Reports, one for exchanges under Double Tax Conventions and one for exchanges under Tax Information Exchange Agreements.

The purpose of the CbC MCAA is to set forth rules and procedures as may be necessary for Competent Authorities of jurisdictions implementing BEPS Action 13 to automatically exchange CbC Reports prepared by the Reporting Entity of an MNE Group and filed on an annual basis with the tax authorities of the jurisdiction of tax residence of that entity with the tax authorities of all jurisdictions in which the MNE Group operates.

 

Country-by-Country Reporting XML Schema: User Guide for Tax AdministrationsIn September 2017, the OECD updated its standardised electronic format for the exchange of CbC Reports between jurisdictions – the CbCR XML Schema – as well as the related User Guide. The updated CbC XML Schema and User Guide now allows MNE Groups to indicate cases of stateless entities and stateless income, as well as to specify the commercial name of the MNE Group. Furthermore, certain clarifications have been made, in particular with respect to the correction mechanisms.

 

 

Country-by-Country Reporting Status Message XML Schema: User Guide for Tax AdministrationsA dedicated XML Schema and User Guide have also been developed to provide structured feedback on received CbC information. The CbCR Status Message XML Schema will allow tax administrations to provide structured feedback to the sender on frequent errors encountered, with a view to improving overall data quality and receiving corrected information, where necessary.

 

Additional documents

 

GUIDANCE and handbooks

The OECD's Inclusive Framework on BEPS has released two a number of sets of guidance and two handbooks to assist and give greater certainty to tax administrations and MNE Groups alike in on the implementation and operation of Country-by-Country (CbC) Reporting (BEPS Action 13).

 

Guidance on the implementation of CbC ReportingGuidance on the implementation of CbC Reporting

As jurisdictions have moved into the implementation stage, some questions of interpretation have arisen. In the interests of consistent implementation and certainty for both tax administrations and taxpayers, the Inclusive Framework on BEPS has issued guidance to address certain key questions. This guidance is periodically updated.

 

Guidance on the appropriate use of information contained in CbC ReportsGuidance on the appropriate use of information contained in CbC Reports

One of the conditions for receiving and using CbC Reports is that a jurisdiction must have in place the necessary framework and infrastructure to ensure the appropriate use of CbCR information. To assist jurisdictions in complying with this condition, the OECD has released guidance on the meaning of "appropriate use", the consequences of non-compliance with the appropriate use condition and approaches that may be used by tax authorities to ensure the appropriate use of CbCR information.

 

Country-by-Country Reporting Handbook on Effective Implementation Handbook on Effective Implementation

Country-by-Country Reporting: Handbook on Effective Implementation is a practical guide to assist countries in implementing CbC Reporting in line with the Action 13 minimum standard. This includes chapters on the filing and use of CbC Reports, the exchange of CbC Reports, operational aspects of CbC Reporting and guidance, stakeholder engagement and training.

 

Country-by-Country Reporting Handbook on Effective Tax Risk Assessment Handbook on Effective Tax Risk Assessment

Country-by-Country Reporting: Handbook on Effective Tax Risk Assessment supports countries in the effective use of CbC Reports by incorporating them into a tax authority's risk assessment process. The handbook explores the advantages CbC Reports offer over other sources of data for risk assessment, how CbC Reports may be used by a tax administration to risk assess MNE groups including some of the tax risk indicators that may be identified, a number of challenges tax administrations may face in using CbC Reports and how these may be addressed, and other data sources that should be used alongside CbC Reports, where available.

 

PEER REVIEW and monitoring

Country-by-Country Reporting (BEPS Action 13) - Peer Review DocumentsThe Country-by-Country Reporting requirements form one of the four BEPS minimum standards.  Each of these minimum standards is subject to peer review in order to ensure timely and accurate implementation and thus safeguard the level playing field. All members of the Inclusive Framework on BEPS commit to implementing the Action 13 minimum standard on CbC reporting, and to participating in the peer review.

In February 2017, the OECD released the terms of reference and methodology for the peer review of the Action 13 minimum standard for CbC reporting: BEPS Action 13 on Country-by-Country Reporting, Peer review documents, approved by the Inclusive Framework on BEPS. The peer review will be conducted by an ad hoc group comprising delegates of both Working Party 6 and Working Party 10, under the aegis of the Inclusive Framework, in accordance with these terms of Reference and methodology. All members will participate on an equal footing.

 

LATEST NEWS

 

Further information

Base Erosion and Profit Shifting (BEPS) refers to tax planning strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity, resulting in little or no overall corporate tax being paid. The Action 13 Report is one of the four BEPS minimum standards. Each of the four BEPS minimum standards is subject to peer review in order to ensure timely and accurate implementation and thus safeguard the level playing field. All members of the CFA Inclusive Framework on BEPS commit to implementing the Action 13 minimum standard, and commit to participating in the peer review.

 

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