BEPS Action 13 from the OECD provided recommended guidelines for Country-by-Country Reporting (CbCR) for global multinational corporations (MNCs). Since the recommendations were published in 2015, individual countries have begun to adopt their own reporting requirements. Below is an update on the latest individual country adoption of CbC Reporting requirements. This listing will be updated as new updates are published. Click on the individual country listing to review the requirements published by the countries where your company does business. Learn more about the OECD's Convention on Mutual Administrative Assistance in Tax Matters.
Updates by Country
June 7, 2015 — The Australian Taxation Office (ATO) has finalized its design of the Local File requirements under the Australian country-by-country reporting (CbCR) laws. The Australian Local File will not be a transfer pricing report; rather, it will require certain specific transfer pricing and business information to be reported in a standardized electronic form. This design is intended by the ATO to minimize overlap with existing Australian transfer pricing reporting requirements. However, the Australian Local File still will require careful taxpayer management since it requires providing the ATO of information not previously required to be reported, and since there is some divergence both in form and content from the global template standard set down by the OECD. Failure to comply carries the possibility of significant penalties, proposed by the Government to increase up to AUD 450,000 from July 1, 2017. The reporting requirements apply to years beginning on or after January 1, 2016 for Australian taxpayers — regardless of size of Australian operations — with global income of more than AUD 1 billion.
December 8, 2015 — In a dramatic finish to the year, the Australian Parliament has passed law that will introduce new financial reporting requirements for multinationals operating in Australia, as well as the following changes as expected:
- A new multinational anti-avoidance law (MAAL), effective from 1 January 2016.
- Increased penalties on adjustments relating to anti-avoidance or transfer pricing, effective for adjustments made in relation to years beginning on or after 1 July 2015.
- Country-by-country (CbC) reporting, master file, and local file transfer pricing documentation requirements, effective for years beginning on or after 1 January 2016. These changes apply to Australian and foreign multinationals with global income of more than AUD 1 billion.
September 16, 2015 — The Australian Treasurer introduced a bill to implement the previously announced Multinational anti-avoidance law (MAAL), CbC reporting and increased penalties for certain large company transactions. The proposed bill implements the OECD's Action 13 CbC report, as well as a Master File and Local File commencing for income tax years beginning on or after January 1, 2016 and states that the form of the CbC filing will correspond to the annexes noted in the new Chapter V of the OECD Transfer Pricing Guidelines published on October 5, 2015 in the final OECD report on Action 13.
July 14, 2016 — The second chamber of Federal Council on 14 July 2016 enacted legislation introducing country-by-country reporting (CbCR) and formal transfer pricing documentation requirements in Austria. The legislation will be enacted on publication in the federal law gazette (this publication is simply a formality). A corresponding Ministerial Ordinance was published in draft on May 25, 2016.
The new legislation follows the three-tier documentation approach contained in the OECD's final report on "Transfer Pricing Documentation and CbCR" issued in October 2015.
The CbC report is due within 12 months after the year-end of the ultimate parent company. For instance, the CbC report for the fiscal year ending 31 December 2016 would be due by 31 December 2017. The CbC report is to be filed electronically via FinanzOnline. Further details are expected to be provided by regulation.
According to the law, each Austrian entity covered needs to inform the competent tax authority if it has to file a CbC report, and if not, who will file the report before the fiscal year-end. Only in situation if an Austrian resident legal entity is required by formal notification to fulfill the obligations of the CbC report, the report can be based on 2017 information.
April 20, 2016 — Bermuda became the 33rd signatory of the Multilateral Competent Authority Agreement for the automatic exchange of country-by-country reports (CbC MCAA), which is based on Article 6 of the Multilateral Convention on Mutual Administrative Assistance in Tax Matters and puts in place the automatic exchange framework for exchanging country-by-country reporting templates, as contemplated by BEPS Action 13.
Under the CbC MCAA, tax administrations where a company operates will get aggregate information annually, starting with 2016 accounts, relating to the global allocation of income and taxes paid, together with other indicators of the location of economic activity within a multinational enterprise group. It will also cover information about which entities do business in a particular jurisdiction and the business activities each entity engages in.
The information will be collected by the country of residence of the parent of the MNE group, and will then be exchanged in accordance with the agreements now also signed by Bermuda. First exchanges will start in 2017-2018 on 2016 information. The tax treaty between the U.S. and Bermuda is limited to insurance enterprises.
March 22, 2016 — Canada released its Federal Budget for 2016-17 (the Budget). The Budget brings forward a number of BEPS measure. Canada has been actively engaged in the efforts to tackle BEPS, and is acting on certain recommendations of the OECD on Action 5 (Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance), Action 6 (Preventing the Granting of Treaty Benefits in Inappropriate Circumstances) and Action 13 (Transfer Pricing Documentation and Country-by-Country Reporting).
The Budget confirmed that Canada will introduce CbC reporting for international groups based on the recommendations issued by the OECD under BEPS Action 13. Accordingly this measure will only apply to multinational enterprises (MNE) with total consolidated group revenue of €750 million or more. The information to report is in line with the OECD Action 13 standards. The first CbC reporting template would be required to be prepared for taxation years that begin after 2015 and would be filed with the Canada Revenue Agency (CRA) within one year of the end of the fiscal year to which the report relates. A secondary filing mechanism is included, meaning no CbC reporting template should be filed in Canada if a surrogate entity has filed a CbC report with the tax authority of the country in which it is resident and there is an exchange of information instrument in place. This implies a January 1, 2016 implementation and December 31, 2017 filing with the first exchange of CbC reporting information is expected to occur by June 2018. Canada will be formalizing exchange agreements with other jurisdictions and will ensure that the other jurisdiction has appropriate safeguards in place to protect the confidentiality of the reports. Draft legislation will be released for comments in the coming months.
The Budget also confirmed that the Government's intention to implement the BEPS minimum standard for the spontaneous exchange of certain tax rulings. The CRA therefore will commence exchanging tax rulings in 2016 with other jurisdictions that have committed to the minimum standard (i.e., OECD member countries, G20 countries, Colombia and Latvia).
Lastly, the Budget confirmed Canada's commitment to address treaty abuse in accordance with the minimum standard under Action 6. Canada will consider including a Limitation on Benefits clause or a Principal Purpose Test clause depending on the particular circumstances and discussions with its tax treaty partners. Amendments to Canada's tax treaties network to comply with this minimum standard could be achieved through bilateral negotiations, the multilateral instrument envisaged under Action 15, or a combination of these two alternatives.
December 9, 2015 — The Danish tax authorities (SKAT) today announced that country-by-country (CbC) notifications must be submitted electronically and in a standardized format on Form 05.034.
The notification is required for all Danish companies/foundations/associations and permanent establishments that form part of a group subject to prepare and submit the CbC report. For companies covered by Danish joint taxation, only the "administration company" is required to complete the CbC notification form and provide the form to SKAT. Taxpayers that have already submitted a CbC notification to SKAT and received a receipt are not required to re-file the notification on the new form.
For corporate groups required to file CbC reports, the timing of the notification requirement in Denmark is determined based on the local company's fiscal year and notification must be provided to SKAT no later than the end of the fiscal year for which the CbC report is submitted.
Note: If the filing company is a non-Danish resident, the information must include a tax identification number for the tax jurisdiction in question. SKAT must also be notified if there is a change in circumstances no longer requiring the submission of the CbC report.
September 18, 2015 — The Danish Minister of Taxation published a draft bill on September 18, that introduces CbC reporting based on the OECD's BEPS Action 13. The Danish draft legislation is largely based on the model legislation outlined in the OECD's CbC reporting Implementation Package of June 8, 2015.
May 25, 2016 — The Economic and Financial Affairs Council of the European Union (ECOFIN) which is made up of the Finance Ministers of all European Union (EU) Member States unanimously voted in favor of the amendments to the EU directive on exchange of information1 (the Directive). The revision, that will implement the recommendations of Organisation for Economic Co-operation and Development (OECD) Base Erosion and Profit Shifting (BEPS) Action 13 on country-by-country reporting, is one of the elements of the European Commission's Anti-Tax Avoidance package introduced in January 2016. According to the ECOFIN, "the principal aim of the directive is to prevent multinationals from exploiting the technicalities of the tax system, or mismatches between different tax systems, in order to reduce of avoid their tax liabilities."
The Directive will require EU Member States to implement a country-by-country reporting obligation in their national legislation in line with the requirements of the Directive within 12 months from the date of its entry into force.
The first reports will have to be filed within 12 months from the end of the fiscal year to which they relate. Member States will have to exchange them within 3 months thereafter, except for the reports relating to fiscal years starting on or after 1 January 2016 where the term would be 18 months after the end of the fiscal year. The European Commission will adopt the necessary practical arrangements for upgrading the existing common platform for automatic exchange in the EU to fit the needs of the new requirements.
1. Council Directive 2011/16/EU of 15 February 2011 on administrative cooperation in the field of taxation.
January 28, 2016 — The European Commission, which is the executive and legislative arm of the European Union, recently proposed an Anti-Tax Avoidance Directive “laying down rules against tax avoidance practices that directly affect the functioning of the internal (EU) market”. In response to the finalization of the OECD BEPS project as well as to political demands of the European Parliament and other stakeholders for a “stronger and more coherent EU approach against corporate tax abuse” this Directive provides for anti- tax avoidance rules in six specific fields, some of which are aligned with the OECD BEPS action plans (interest deductibility, CFC rules and a framework to tackle hybrid mismatches) and others that are unique to the EU (exit taxation, switch-over clause and general anti-abuse rules). Under the EU legal framework, once such a directive is approved, member states must enact laws with effective dates as specified in the directive. In effect, an approved directive will drive “hard law” enactment by member states that multinationals must then comply with.
January 11, 2016 — In the EU’s continued pursuit of abusive fiscal state aid cases, the European Commission (“EC”) has determined that the Belgian "excess profit" tax regime, in place since 2005, is “a very serious distortion of competition” within the EU's single market, affecting a broad range of economic sectors.
According to the EC release on this date, this selective tax advantage regime benefitted at least 35 multinational entities (mainly from the EU) that now must return unpaid taxes to Belgium. The "excess profit" tax regime only benefitted certain multinational groups that were granted a tax ruling while "stand-alone companies" (i.e., companies that are not part of groups) only active in Belgium could not claim similar benefits.
Belgium now must recover the full unpaid tax from the multinational companies that have benefitted from the regime. The EC estimated the total amount to be recovered from the companies to be approximately €700 million.
December 22, 2015 — The European Commission is considering whether to divide draft legislation proposing a common consolidated corporate tax base (CCCTB) and a range of other measures into two separate laws so that key initiatives outlined in the OECD's action plan on base erosion and profit shifting can be introduced separately.
Although the European Parliament opposes splitting up the CCCTB proposal, the notion is being deliberated after the finance ministers of the 28 EU member states backed it at a Dec. 8 Council of Economic and Financial Affairs meeting (236 TMIN, 12/9/15).
European Commission officials said that dividing up the CCCTB proposal and creating a separate directive to tackle BEPS could expedite implementation among EU member nations of the key measures included in the Organization for Economic Cooperation and Development's BEPS package.
July 8, 2015 — The European Parliament voted overwhelmingly in favour of expanding the scope of the current European Union (EU) country-by-country (CbC) tax reporting requirement to include all listed companies and non-listed firms with more than 500 employees, subject to approval by EU member states. Overall the legislation would require companies to make the template public information with regard to profits or losses before tax, taxes paid on profits or losses and public subsidies received on a CbC reporting basis, which expand other EU accounting and transparency directive changes.
December 13, 2016 — The French Constitutional Court (Conseil Constitutionnel) issued a decision concluding that a provision that imposes a country-by-country (CbC) public financial reporting requirement is unconstitutional. This type of CbC public financial reporting is distinguishable from CbC reporting for tax purposes. Note: This ruling only applies to public disclosure of CbCR, not the regular filing requirement.
December 17, 2015 — After delegates in the French National Assembly voted twice this week to mandate public country-by-country reporting for multinational enterprises, the measure was surprisingly rejected in a last-minute vote demanded by the executive branch.
Political and nonprofit organizations working to bring transparency to Europe's murky tax administrations are outraged at what they consider a last-minute stab in the back by the Socialist government of President Francois Hollande.
The first version of amendment 340 to the Finance Amendment Bill for 2015, which the National Assembly had passed a few days earlier, was rejected by the more conservative Senate and returned to the assembly for reconsideration. Under French parliamentary rules, the National Assembly has the last word on the passage of law. The Assembly's rejection of the bill was unexpected, since subsequent outcomes rarely differ from original votes.
The demand for another vote was made by Secretary of State for the Budget, Christian Eckert using government privilege. He told delegates that France should be wary of the bill's approach to clarifying the taxes paid by MNEs, warning of competitive risks. The government had previously proposed an amendment to the 2016 budget bill providing that country-by-country reporting results would only be shared with other governments and only companies with annual sales figures over €750 million would be subject to the reporting requirement. Companies would be allowed to avoid disclosure by paying a fine of no more than €100,000. The measure was approved by the National Assembly November 12.
December 4, 2015 — French Parliament took an important step in the fight against tax avoidance as part of the Finance Amendment Bill for 2015. They have adopted public country-by-country (CbC) reporting, a measure which will increase financial transparency by making it mandatory for French companies to publish information about their activities and the taxes they pay in all countries where they operate.
This measure, which has been called for by the French Platform on Tax Havens and its partners for more than 10 years, will reveal artificial financial set-ups and allow all countries, including developing countries, as well as citizens, journalists, parliamentarians, trade unions, investors and civil society as a whole to know if the taxes paid by companies correspond to their real economic activities.
Two years after the vote on a similar measure for French banks, which then facilitated the adoption of identical requirements by the European Union for all European banks, the French Parliament has again led the way on financial transparency by adopting public CbC reporting for all sectors. This vote is all the more important as the question is currently being discussed at a European level after the European Parliament voted in July in favor of public CbC reporting as part of the Shareholders’ Rights Directive.
The organizations of the French Platform on Tax Havens and its partners now call on the senators to endorse this progress and vote in favor of the amendment during the debate on the Finance Amendment Bill for 2015 which will take place in the Senate over the next few weeks.
November 12, 2015 — The French National Assembly on November 12 approved an amendment to the draft Finance Bill for 2016 implementing the country-by-country (CbC) reporting requirement in France, with the government's full support. The measure must be approved by the full assembly before it can enter into force. That vote is expected in December.
The precise list of data to be included in the French CbC report would be defined by an administrative decree, but should include information about a multinational enterprise's turnover, before-tax profits, and number of employees in the countries where the group is located. The administrative decree is expected to implement the recommendations of the OECD's final report on Action 13 of the base erosion and profit shifting (BEPS) project Large companies would be required to send CbC information on their activities to the French tax authorities if an amendment to the 2016 draft budget put forth by the National Assembly's Finance Committee is approved by the full assembly. The amendment, proposed November 4 by the governing Socialist Party, is intended to "contribute to the fight against tax evasion," according to a statement released by the National Assembly. It is designed to align with the OECD's recommendations on the confidential transfer of CbC information to tax authorities.
July 1, 2016 — Germany's Ministry of Finance (BMF) published a ministerial draft bill on implementation of country-by-country (CbC) reporting and other measures under the base erosion and profit shifting (BEPS) project. The draft bill is the first step for implementing the BEPS measures in German law. Completion of the legislative procedure is expected in the second half of 2016. Additional BEPS measures—for example, in the areas of hybrid mismatch arrangements and CFC taxation—are expected to be included in subsequent bill.
Among the provisions in the now pending legislation are measures for:
- Implementation of the OECD recommendations regarding transfer pricing documentation (Master file, Local file, and CbC reports), for initial preparation for fiscal years beginning after 31 December 2015.
- Automatic exchange of cross-border tax rulings and advance transfer pricing arrangements between related enterprises entered into or amended since 1 January 2012.
- How to determine the arm's length principle in tax treaty situations.
July 16, 2015 — The German Finance Ministry announced that Germany will adopt CbC reporting based upon OECD Guidance. It is unclear at this time when German-parented multinational enterprises (MNEs) resident in Germany will be required to file their initial CbC template.
June 20, 2016 — Hong Kong will join the Organisation for Economic Co-operation & Development (OECD) as an Associate in the inclusive framework for implementation of the package of measures against base erosion and profit shifting (BEPS).
Secretary for Financial Services & the Treasury Professor KC Chan made the announcement on June 20th, saying the Government accepted the organization's invitation to join under the name of "Hong Kong, China."
Professor Chan noted that as an Associate, Hong Kong will become a member of the BEPS Project and work on an equal footing with the organization, the Group of Twenty, as well as other countries and jurisdictions to implement the BEPS Package and to develop standards.
"Noting that the timing of implementation may vary to reflect the level of development of countries and jurisdictions, Hong Kong's commitment to implement the BEPS package is subject to timely passage of the necessary legislative amendments. In coming up with the timelines for implementation, we will take into account factors such as the characteristics of the domestic tax regime, the envisaged magnitude of legislative changes involved and the practical need to prioritise amongst the BEPS measures," he said.
The Government is conducting analysis on the BEPS Package, with a view to mapping out work priorities. It will consult the industry on the strategy for implementing the proposals at an appropriate juncture and prepare for taking forward the necessary legislative amendments.
February 25, 2016 — India has proposed the adoption of the BEPS Action 13 Transfer Pricing Documentation regime in its Union Budget for 2016. The three-tier transfer pricing documentation structure calling for a master file, local file and the CbC report is expected to be introduced from April 1, 2016. The revenue threshold for filing the CbC report is €750 million at the MNE group level. No revenue threshold for filing the master file was specified.
January 5, 2016 — The Irish tax authority has published regulations requiring Irish resident companies of multinational groups to report their business activities on a CbC Reporting template. Under the Taxes (Country-by-Country Reporting) Regulations 2015, companies will have to provide the template to the Irish authorities for fiscal years beginning on or after January 1, 2016.
The Irish regulations, which went into effect Jan. 1, reflect the provision in Finance Act 2015, which was signed into law December 23 and requires multinational companies in Ireland with consolidated revenue of more than 750 million euros ($817.72 million) to file the template.
October 13, 2015 — As part of the Irish government's Budget 2016 delivered on October 13th the Ireland Department of Finance published an update on "Ireland's International Tax Strategy" noting plans to legislate Country by Country Reporting rules in the upcoming Finance Bill in accordance with the OECD standard effective January 1, 2016. The budget also includes a new "Knowledge Development Box" that is the first patent box regime that complies with the OECD's "modified nexus" approach.
December 22, 2015 — As part of the 2016 budget law Italy has now approved country-by-country (CbC) reporting requirements as prescribed by the OECD BEPS Action 13. The new CbC reporting requirements are effective January 1, 2016.
March 29, 2016 — The Japanese legislature has enacted country-by-country reporting (CbCR) as part of its 2016 Tax Reform Bill.
The rules, issued March 29, will be effective for companies with fiscal years beginning on or after April 1, 2016, leaving a three-month gap with the U.S. requirements, which are expected to be effective as of June 30.
According to an EY LLP alert, the rules apply to Japanese parent companies, as well as permanent establishments of non-Japanese companies that aren't filing in a jurisdiction having a tax treaty with Japan. Companies with annual group revenue of less than 100 billion Japanese yen ($889 million) are exempt. The threshold set by the proposed U.S. regulations is $850 million.
Japan's bill also implements requirements for a master and local file. The master file will apply for years beginning after April 1, 2016, while the local file will not be required until April 1, 2017.
December 24, 2015 — On December 24 the Japanese Cabinet approved the 2016 tax reform proposal (2016 Tax Reform), calling for revisions to Japanese transfer pricing (TP) documentation requirements in line with the OECD BEPS Action 13 Final Report published on October 5, 2015.
Under the reform, resident ultimate parent companies of multinational enterprises will be required to file a Master File and a country-by-country (CbC) report. The new rules also call for the contemporaneous preparation of a Local File by all taxpayers that have group revenue of ¥ 100 billion (€780 million) or more in the previous year.
The master file and country by country reports will be due within 12 months of the effective date of April 1, 2016. The local file must be submitted "without delay" upon request in an audit. The reforms defines "without delay" as 45 days for those taxpayers that are required to prepare the file contemporaneously and 60 days for all others.
August 31, 2016 — Liechtenstein has approved a report and application to adopt the OECD's multilateral competent authority agreement (MCAA) on the exchange of country-by-country reports (CbCR), and a law providing for the automatic exchange of CbC reports.
On August 22 Liechtenstein deposited its instrument of ratification for the MCAA which will enter into force on December 1. Liechtenstein's law implementing CbC reporting is in line with the recommendations in action 13, requiring reporting by Liechtenstein-based multinational groups with consolidated annual revenues exceeding CHF 900 million. The CbCR law will come into force on January 1, 2017, a year later than the OECD recommends if no national referendum is called to challenge the law, according to the news release. Affected multinationals may submit voluntary CbC reports for the 2016 reporting period to avoid having to file local reports in jurisdictions in which they operate.
December 28, 2016 — The law on non-public country-by-country reporting (CbCR) transposing the EU Directive 2016/881 of May 25, 2016 into Luxembourg domestic law was published on December 27, 2016 in the official gazette.
Following publication, the Luxembourg tax authorities issued guidance summarizing the main provisions of the new law, and clarifying the notification procedure in a "frequently asked questions" (FAQ) section. The guidance includes details on the procedure relating to the online reporting tool for notification, which is now available, as well as a section "procedure for country-by-country report" still to be completed.
CbC notifications about the reporting entity must be provided no later than the last day of the reporting fiscal year of the MNE group—i.e., by December 31 2016, if the accounting year is the calendar year, or by another date based on the MNE's fiscal year (e.g., by March 31, 2017 if the accounting period begins April 1, 2016).
The CbC report must be filed with the tax authorities within 12 months of the last day of the reporting fiscal year of the group: (1) by December 31, 2017, if the accounting year of the MNE group for 2016 ends on December 31, 2016; or (2) by another date based on the fiscal year of the MNE group (e.g., by January 31, 2018, if the accounting period begins on February 1, 2016 and ends on January 31, 2017).
In line with DAC 4, the Luxembourg measures require the first CbC report to be filed for the fiscal year of the MNE group beginning on or after January 1, 2016. However, the reporting period may differ in third countries. Failure to comply with these rules may result in a penalty of up to €250,000.
August 2, 2016 — The Luxembourg government has submitted draft legislation to parliament to implement Country-by-Country (CbCR) reporting requirements based on BEPS Action 13 and transpose into domestic law Council Directive (EU) 2016/881, which amends the administrative cooperation Directive (Directive 2011/16/EU) to require all EU Member States to exchange CbC reports.
The Luxembourg tax office may impose a fine of maximum €250,000 on the reporting entity in cases of non-filing or of late, incomplete or incorrect filing of the CbC Report. The fine should also be imposed in case of non-compliance with the filing rules (e.g. the notification requirements foreseen in the annex to the Draft Law). This fine corresponds to the fines to be imposed with regard to non-compliance under the FATCA and CRS regulations. Taxpayers may challenge the decision of the tax office in front of the Administrative Tribunal.
March 24, 2016 — In a consultation session with the Chartered Tax Institute of Malaysia, the Malaysian Inland Revenue Board (IRB) announced that they are planning to introduce the CbC reporting requirement. Furthermore, the current local transfer pricing documentation requirements will be updated to include the Master File-Local File concepts, in line with Action 13 of the OECD's BEPS project. The CbC reporting requirement and the new transfer pricing documentation requirements are expected to be effective in Malaysia from January 1, 2017, with the first filing of the CbC reports by December 31, 2018. The CbC reporting template information will be automatically shared with foreign tax administrators via the Multilateral Competent Authority Agreement (MCAA) which Malaysia has signed. Amendments to the current legislation, rules and guidelines to implement these changes are expected to be announced by July 2016.
September 8, 2015 — A tax reform package including significant transfer pricing disclosure and documentation requirements was presented to the Mexican Congress for review and approval. The proposed rules, inspired by the OECD recommendations under BEPS Action 13, include a requirement for Mexican corporate taxpayers and permanent establishments to file a master file, a local file, and a CbC report on an annual basis. In addition to the OECD CbC required disclosures, intercompany royalties, interest and management services paid and received are also required to be disclosed.
The master file and local file obligations would apply to Mexican taxpayers with prior year revenues in excess of MXN 644 million (approximately US$37 million). The CbC reporting obligation would apply only for Mexican multinational companies or those that are designated by the parent company of a foreign multinational group as a "surrogate parent entity" responsible for filing the CbC report on behalf of the group with revenues of more than MXN 12 billion (approximately US$700 million).
Additionally, under a secondary mechanism, the Mexican tax authorities would have the power to request that a CbC report be filed by the local subsidiary of a foreign group within a 120 day period if they are not able to obtain the corresponding information from the other country's tax authorities via exchange of information.
The proposed new transfer pricing documentation and CbC reporting requirements would be applicable to fiscal years beginning on or after 1 January 2016 and the first reports would be due by 31 December 2017. This tax reform proposal also establishes fines for non-compliance in the range of MXN $140,540 (USD 8,365) to MXN $200,090 (USD 11,910). In addition, failure to file or filing incomplete or erroneous reports would be penalized by disqualifying the taxpayer from entering into contracts with the Mexican public sector.
December 22, 2015 — The Dutch government has released regulations implementing the requirements recommended in the OECD's BEPS report on Action 13 (transfer pricing documentation) and incorporated in its budget legislation for 2016.
Regulation No. DB/2015/462M, issued by the Dutch Ministry of Finance on December 30, provides implementation guidance on the transfer pricing documentation requirements included in the government's 2016 budget proposals, which were introduced in September and approved by the Senate December 23.
The approved budget legislation adopts the OECD's recommended three-tiered approach to documentation, which requires that multinational groups meeting specific revenue thresholds prepare a master file for the entire global group, a local file for each group entity, and a country-by-country (CbC) report to be filed in the ultimate parent company's tax jurisdiction.
Under the new law, which takes effect at the beginning of 2016, master and local file submissions will be required from Dutch entities that are part of a multinational group with consolidated revenue of at least €50 million, and a CbC report must be filed by Dutch resident parents of multinational groups with consolidated revenue of at least €750 million. As recommended in Action 13, the documentation requirements will apply for tax years beginning on or after January 1, 2016.
September 15, 2015 — Proposed corporate tax legislation was published that addresses the Dutch participation exemption regime, the "substantial interest rules", tax treatment of cooperatives, and transfer pricing compliance requirements. With respect to the transfer pricing compliance requirements, the proposed legislation would adopt CbC reporting in conformity with the OECD guidelines.
March 21, 2016 — The Inland Revenue of New Zealand published a questionnaire on its website as part of its compliance program, which is designed to collect key information about financing and transfer pricing arrangements in light of the global focus on BEPS. The questionnaire is intended to gather information from nonresident owned groups of companies operating in New Zealand to evaluate the tax risk arising from international dealings, especially those involving associated persons. The questionnaire covers the 2015 income year (i.e., balance dates ending October 2014 to September 2015) asking, among other things about transactions valued at greater than NZ$20 million (approx. US$13.5 million) that involve associated persons resident in Hong Kong, Ireland, Luxembourg, the Netherlands, Singapore or Switzerland. It also asks whether there were any material structural changes in the 2015 income year which resulted in a reduction of business functions, assets held, and risks borne by the New Zealand operations.
In addition, it requests responses on whether the group has used an instrument with a face value equal to or exceeding NZ$30 million (approx. US$20 million) that has resulted in a deduction in New Zealand with no corresponding income that is taxable in the other jurisdiction, and whether the group included any hybrid entities that have resulted in a conflict of tax treatment as between jurisdictions in the 2015 income year. The responses are due by May 31, 2016.
December 5, 2016 — The Norwegian rules on country-by-country (CbC) reporting have been approved by the Norwegian parliament. Norway's CbC reporting rules will be effective beginning from the fiscal year 2016, with the first reporting to be made before 31 December 2017.
The CbC reporting rules require Norwegian multinational corporations with an annual income of NOK 6,500,000,000 or more (approximately €723 million as of 5 December 2016) to file a CbC report.
When a foreign parent company in the group has an obligation to file a CbC report in its country of residence, the Norwegian entity must notify the Norwegian tax authorities within the same time period as that for tax reporting—i.e., by 31 May. The duty to notify will be in effect from fiscal year 2016 and will be part of the annual tax reporting from the company (i.e., the first time by end of May 2017). The notification must include the name of the filing entity and in what country the CbC report was submitted.
A secondary reporting obligation may apply for a Norwegian subsidiary when a parent company within the group does not have an obligation to file the CbC report in its country of residence. The secondary reporting will be in effect from the fiscal year 2017, with the reporting to be made before 31 December 2018.
December 5, 2016 —The Organisation for Economic Cooperation and Development (OECD) today announced an update to support the global implementation of country-by-country (CbC) reporting under Action 13 of the base erosion and profit shifting (BEPS) project:
– Key details of jurisdictions' domestic legal frameworks for CbC reporting.
– Additional interpretive guidance on the CbC reporting standard.
According to the OECD release, these documents provide essential information that will give certainty to tax administrations and multinational entity (MNE) groups on implementation of CbC reporting, as follows:
The details on jurisdictions' legal frameworks for CbC reporting include the status of the legislation, first reporting periods, availability of surrogate filing and voluntary filing, and whether local filing can be required. This will be updated as legal frameworks are finalized. Information will also be published in the coming months as to the Qualifying Competent Authority Agreements (QCAA) being put in place to facilitate the international exchange of CbC reports between tax administrations.
The additional interpretive guidance relates to situations when a notification to the tax administration may be required to identify the reporting entity within a MNE group (as provided in Article 3 of the Model Legislation in the Action 13 Report). The interpretive guidance confirms that if notifications are required, jurisdictions will have flexibility as to the due date for such notifications—especially during the transition period when jurisdictions are still completing their implementation of CbC reporting because MNE groups may not yet have the necessary information to submit their notifications.
June 29, 2016 —The OECD has released a new framework for Guidance on the Implementation of Country-by-Country (CbC) Reporting.
The OECD/G20 BEPS Project set out 15 key actions to reform the international tax framework and ensure that profits are reported where economic activities are carried out and value created. A key pillar of the project focused on ensuring transparency while promoting increased certainty and predictability. One of the main outcomes of that work has been the adoption of country-by-country reporting, as set out in the 2015 BEPS Report on Action 13 "Transfer Pricing Documentation and Country-by-Country Reporting." Under CbC reporting, MNEs will be required to provide aggregate information annually, in each jurisdiction where they do business, relating to the global allocation of income and taxes paid, together with other indicators of the location of economic activity within the MNE group. It will also cover information about which entities do business in a particular jurisdiction and the business activities each entity engages in.
Following the endorsement of the BEPS Package by G20 Leaders in November, the focus has now shifted to ensuring a consistent implementation, including of the new transfer pricing reporting standards developed under Action 13 of the BEPS Action Plan. To that aim, the guidance released today sets out:
May 12, 2016 — As part of continuing efforts to boost transparency by multinational enterprises (MNEs), Canada, Iceland, India, Israel, New Zealand and the People's Republic of China signed today the Multilateral Competent Authority agreement for the automatic exchange of Country-by-Country reports ("CbC MCAA"), bringing the total number of signatories to 39 countries. The signing ceremony took place in Beijing, China.
The CbC MCAA allows all signatories to bilaterally and automatically exchange Country-by-Country Reports with each other, as contemplated by Action 13 of the BEPS Action Plan. It will help ensure that tax administrations obtain a complete understanding of how MNEs structure their operations, while also ensuring that the confidentiality of such information is safeguarded.
Beyond the MCAA signing ceremony Israel and the Russian Federation joined the 80 current signatories to the CRS Multilateral Competent Authority Agreement ("CRS MCAA"), the key international framework agreement for putting in place the automatic exchange on offshore financial accounts foreseen by the OECD Common Reporting Standard (CRS).
- Transitional filing options for MNEs that voluntarily file in the Parent jurisdiction;
- Guidance on the application of CbC reporting to investment funds;
- Guidance on the application of CbC reporting to partnerships; and
- The impact of exchange rate fluctuations on the agreed EUR 750 million filing threshold for MNE groups.
March 24, 2016 — The OECD released a public consultation document seeking input with respect to the treaty entitlement of non-collective investment vehicle (non-CIV) funds. Responses to the consultation document are requested by 22 April 2016.
The consultation document follows up on the OECD's final BEPS report on Action 6 (Preventing the Granting of Treaty Benefits in Inappropriate Circumstances) released last fall. In the Action 6 final report, the OECD stated that it would continue to examine issues relating to the treaty entitlement of non-CIV funds to ensure that new treaty provisions included in the BEPS Action 6 report would adequately address the issue.
The document includes a number of specific questions raised in comments received on previous discussion drafts related to the Action 6 report as to how new provisions could impact the treaty entitlement of non-CIV funds. Specifically, input is requested in response to a number of questions relating to the application of the Limitation on Benefits provision, the Principal Purpose Test rule, anti-conduit rules, and the "special tax regime" proposal, discussed in previous discussion drafts or reports under Action 6.
Responses will be considered at the May 2016 meeting of the OECD Working Party 1.
March 22, 2016 — The OECD released the standardized electronic format for the exchange of BEPS Country-by-Country (CbC) reports. The released material encompasses the CbC XML Schema and a User Guide. The XML (extensible markup language) Schema is a commonly used data structure for electronically holding and transmitting information. The User Guide explains the information required to be included in the CbC XML Schema. With this material, the OECD's objective is to facilitate a swift and uniform implementation of CbC reporting. While the CBC XML Schema has been primarily designed for use by tax authorities, the CbC XML Schema can also be relied upon by taxpayers for transmitting the CbC reporting template to tax authorities, provided the use of the Schema is mandated domestically.
January 27, 2016 — As part of the OECD’s continuing efforts to boost the tax transparency of multinational enterprises (MNEs), 31 countries have signed the Multilateral Competent Authority Agreement (MCAA) for the automatic exchange of country-by-country reports. The signing ceremony marked an important milestone towards the eligibility of these countries to participate in the automatic exchange mechanism of Action 13.
In addition, as noted in Section 8 of the MCAA, countries must also have in place legislation requiring resident MNE’s to file the country by country report and the necessary legal framework and infrastructure to ensure the required confidentiality and data safeguards standards.
The MCAA will enable consistent and swift sharing of the new country by country reporting between participating governments.
“Country-by-Country Reporting will have an immediate impact in boosting international co-operation on tax issues, by enhancing the transparency of multinational enterprises’ operations,” said OECD Secretary-General Angel Gurría. “Under this multilateral agreement, information will be exchanged between tax administrations, giving them a single, global picture on the key indicators of multinational businesses. This is a much-needed tool towards the goal of ensuring that companies pay their fair share of tax, and would not have been possible without the BEPS Project.” (Read the remarks from the Multilateral Competent Authority Agreement signing ceremony for country-by-country reporting).
Countries that signed include Australia, Austria, Belgium, Chile, Costa Rica, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Japan, Liechtenstein, Luxembourg, Malaysia, Mexico, Netherlands, Nigeria, Norway, Poland, Portugal, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Switzerland and United Kingdom.
Notably, the U.S. was not a signatory to this MCAA, choosing to enter into bi-lateral agreements instead.
November 15, 2015 — The G20 leaders at their summit in Antalya, Turkey, on November 15-16 endorsed the 13 final reports developed under the G20/OECD base erosion and profit shifting (BEPS) project and urged the timely implementation of the project in all countries, including developing nations.
The final reports are based on the BEPS action plan, approved by the G20 in July 2013, which identified 15 key areas to be addressed by 2015 to combat multinational corporation tax avoidance.
The leaders said that the BEPS measures furthered a "globally fair and modern international tax system" and that widespread and consistent implementation of the BEPS package, particularly the measures on exchange of information on private tax rulings, will be crucial to the projects effectiveness.
The leaders also called on the OECD to develop by early 2016 a framework for monitoring the implementation of the BEPS project with the equal participation of interested non-G20 countries.
The leaders acknowledged that the timing of implementation of the project outcomes by developing countries may not be the same as that of other countries, and said they expect the OECD and other international organizations to ensure that developing nations' circumstances are appropriately addressed in the framework.
November 6, 2015 — The OECD focus group tasked with overseeing the negotiation of a multilateral tax treaty, under BEPS Action 15 has established a subgroup on arbitration.
According to an OECD news release, the focus group, comprising 94 countries, decided to "develop an optional provision on mandatory, binding MAP arbitration"—arbitration under the mutual agreement procedure in tax treaties—at its inaugural meeting in Paris Nov. 5-6.
The business community has raised material concerns about the increased incidence of double taxation disputes that will strain the Competent Authorities across the globe charged with resolving such disputes. In response, twenty nations have committed to provide mandatory binding arbitration in their bilateral tax treaties as a way to guarantee that double-tax disputes are resolved within a specified time frame. Australia, Austria, Belgium, Canada, France, Germany, Ireland, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway, Poland, Slovenia, Spain, Sweden, Switzerland, the U.K. and the U.S. all have declared their commitment to provide for mandatory binding arbitration of double-tax disputes in their bilateral tax treaties, the OECD said in its October 5 final report on Action 14. This would appear to be a mutual benefit to both the business community and the tax authorities.
October 9, 2015 — In response to the OECD's October 5th release of the final package of measures to address BEPS, G-20 finance ministers expressed their strong support of the fifteen final BEPS project reports at their meeting in Lima, Peru on October 9 and approved it for submission to G20 Leaders for their endorsement at the upcoming Antalya,Turkey Summit in mid-November.
The finance ministers also renewed a commitment for rapid, widespread, and consistent implementation of the BEPS measures by all of the countries participating in the project and reiterated the need for the OECD to prepare an inclusive monitoring framework by early 2016 in which all countries will participate on an equal footing, the OECD said.
October 5, 2015 — The OECD delivered the final 2015 BEPS package two years after it was launched in 2013. The package is now scheduled to be reviewed and approved by the G20 Finance Ministers at their meeting on 8 October, in Lima, Peru and then by G20 leaders at their meeting on November 15 in Antalya, Turkey.
The overall aim of the BEPS measures is to close gaps in international tax rules that allow multinational enterprises to legally but artificially shift profits to low or no-tax jurisdictions. OECD and G20 countries developed the measures on an equal footing, with extensive engagement by developing countries and regional tax organizations. The focus now shifts to designing an inclusive framework for monitoring and supporting implementation, with all interested countries and jurisdictions invited to participate on an equal footing.
September 4/5, 2015 — The G20 Finance Ministers and Central Bank Governors met in Ankara, Turkey and issued a meeting communiqué which references the final package of BEPS reports to be reviewed at their 8 October meeting in Lima, Peru. The communiqué notes that the effectiveness of the BEPS project "will be determined by its wide and consistent implementation." It states the G20's intent to monitor implementation of the BEPS recommendations at the global level, with particular reference to the exchange of information on cross-border tax rulings, and calls on the OECD to prepare a framework by early 2016 for the involvement of interested non-G20 jurisdictions, particularly developing economies.
The OECD confirmed that the BEPS final reports will be released on 5 October 2015 covering all 15 BEPS Actions. The G-20 finance officials say they expect to adopt the final BEPS package in October and submit it to G-20 leaders at the Nov. 15-16 summit in Antalya, Turkey. The expectation by the OECD is that all OECD countries at a minimum, will adopt country by country reporting over the next few years. The OECD and the G-20 expressed hope that all non-OECD countries also consider adoption.
September 14, 2016 — The Minister of Finance of Pakistan, signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters ( the "Convention") becoming the 104th jurisdiction to join the Convention.
By signing, Pakistan sends a strong signal of its commitment to fight offshore tax evasion and avoidance. Pakistan is a Member of the BEPS inclusive framework and, as such will exchange automatically country by country reporting as required by Action 13 of the BEPS package. The Convention provides the ideal instrument to swiftly implement automatic exchange so the signing and ratification of the Convention is very timely.
October 27, 2015 — New law in Poland expands the requirements for transfer pricing documentation, and includes country-by-country (CbC) reporting. The new provisions essentially reflect the recommendations made in Action 13 the OECD's base erosion and profit shifting (BEPS) project, and provide for CbC, master file and local file reporting.
March 16, 2016 — The Portuguese Budget Law for 2015 enacted the implementation of country-by-country (CbC) reporting requirements for multinational groups. The new rules adopt the recent guidance by the OECD as part of its BEPS initiative, Action 13. The new requirements will take effect on and after January 1, 2016.
With respect to the CbC reporting, Portuguese parent entities as well as entities with tax residence in Portugal that (i) have an obligation to prepare consolidated financial statements, (ii) participate in or control (directly or indirectly) one or more foreign entities or permanent establishments, iii) have consolidated income reported in the last fiscal period equal or exceeding €750 million, and (iv) do not have the CbC report filed for them by another Portuguese entity, or by a foreign entity that submits CbC reports directly or through a designated entity in a country with which Portugal has an automatic exchange of information agreement in force.
Furthermore, under a secondary mechanism, Portuguese based entities that are not ultimate parents of a qualifying group and permanent establishments could be required to submit a CbC report if (i) their ultimate foreign parent is not required to file the CbC report in its home country, (ii) the entities that own or control them, if they were resident in Portugal, would have been subject to the obligation to file the CbC report in Portugal, and iii) they do not demonstrate that any other entity of the group that is a tax resident in Portugal or in any other country with which Portugal has an exchange of information agreement has been designated to submit the CbC report.
The CbC report would summarize information for every country where the group has tax presence through a legal entity or a permanent establishment, including the following: earnings, corporate income tax, equity, employees, tangible assets and list of tax residents. CbC reports would be prepared in accordance with a predefined template and submitted electronically within 12 months from the end of the fiscal year to which they relate. Failure to submit the CbC reporting template before the due date may result in penalties.
December 15, 2016 — The government of Slovakia introduced a bill to add a requirement for country-by-country (CbC) reporting as part of the Slovak domestic tax law. The bill has an effective date of March 1 2017, once approved by Parliament and enacted into law.
The bill includes provisions to amend and supplement Act no. 442/2012, and requires multinational entities (MNEs) with annual consolidated group revenue equal to or exceeding €750 million in the previous year to file a CbC report. The CbC report would be due no later than 12 months after the last day of the reporting fiscal year of the MNE group.
Slovak entities would be allowed (or required) to act as surrogates in certain instances and MNEs would have to inform the relevant tax office of their status.
December 11, 2015 — The South Africa Revenue Service (SARS) has announced that it will implement country-by-country (CbC) reporting in line with the OECD base erosion and profit shifting (BEPS) initiative (Action 13), effective 1 January 2016.
The objective of CbC reporting is to provide the tax authorities in the jurisdiction of the ultimate parent company with an overview of the aggregate tax position of a multinational enterprise (MNE), and the allocation of income, taxes paid and economic activity across the jurisdictions in which the MNE operates. South African-headquartered MNEs will be required to submit the CbC report to the SARS, which will share the report (as well as the master file) with relevant tax authorities through the exchange of information process.
July 28, 2016 — South Korea's Ministry of Strategy and Finance released draft legislation that would amend existing provisions of Korean law—specifically, Article 11 of the law known in English as the "Law for the Coordination of International Tax Affairs" (LCITA) and Article 21-2 of the "Presidential Enforcement Decree of the LCITA" (PED of LCITA)—to implement certain OECD base erosion and profit shifting (BEPS) initiatives.
The draft legislation aims to bring the Korean regulations more in line with Action 13 of the BEPS project, as well as to address taxpayer concerns that were raised after the release of the initial Master file and Local file requirements.
Under the newly released draft legislation, the CbC report has been added to the scope of the "Combined Report of International Transactions" (CRIT). The CbC report would be required for any multinational entity (MNE) with consolidated sales of over one trillion KRW, and would be required to be submitted by the ultimate parent company of the MNE. If the parent company resides in a country that does not require a CbC report, or does not facilitate the exchange of the CbC report, it would be the obligation of the domestic entity to submit the CbC report. Once the draft legislation is approved, the CbC report would be required for fiscal years starting on or after 1 January 2016.
August 6, 2015 — The Korean Ministry of Strategy and Finance (MOSF), announced 2015 tax reform proposals including a new documentation requirement for multinationals in line with the master file and local file recommendations under BEPS Action 13. The proposed new obligation would apply to domestic entities (or permanent establishments) that have transactions and assets exceeding specified thresholds (the precise criteria, including the thresholds, are yet to be announced). These entities would be required to submit both a master file and a local file to the Korean tax authorities by the corporate tax return filing due date. Failure to comply with the reporting requirement would result in a noncompliance penalty of up to KRW 10 million (USD 8,500). The proposal does not include a requirement to file a CbC report. It is proposed that the new documentation requirement would take effect for fiscal years beginning on or after 1 January 2016 and the first report would need to be submitted by the corporate tax return due date for the taxable year beginning on or after 1 January 2016.
July 10, 2015 — The Spanish Ministry of Finance published Royal Decree 634/2015 which contains corporate income tax regulations including country-by-country reporting. The new CbC reporting requirements largely reflect the recommendations made by the OECD with respect to Action 13 and apply to companies with revenues of EUR 750 million or greater. Different from the OECD Base Erosion and Profit Shifting (BEPS) model legislation, the decree also adopts the Master File and Local File requirements for expanded transfer pricing documentation for companies with revenues equal to or greater than EUR 45 million. Two separate tiers of simplified documentation requirements were also enumerated. One tier is applicable to companies with revenues up to EUR 10 million and another tier applies to companies with revenues between EUR 10 million and EUR 45 million. This is one example of how countries will start straying from OECD recommendations.
April 15, 2016 — The Swiss Federal Council released draft legislation that would require Swiss-parented multinational entities (MNEs) with annual consolidated group revenue of CHF 900 million or more to comply with new transfer pricing and transparency requirements, with the first country-by-country (CbC) report due for fiscal years beginning on or after January 1, 2018. However, Swiss MNEs could voluntarily file the CbC report for fiscal years beginning on or after January 1, 2016, in order to avoid certain exposures (e.g., penalties) in countries where CbC reporting requirements already have been introduced. In certain circumstances, Swiss group entities (other than Swiss-parented MNEs) also would be obliged to file CbC reports. The draft law is based on the guidelines provided by the OECD Action 13 final report. Under the draft law, failure to file or filing an incorrect or incomplete CbC report will trigger a penalty of up to CHF 250,000. In addition, penalties for non-cooperation with the Swiss Federal Tax Authorities during a CbC reporting examination will also carry penalties of up to CHF 50,000.
The proposed law still requires Parliament passage and may also require a referendum and public vote. The law is expected, once in force, to impact 200 Swiss Parented MNEs.
March 16, 2016 — The National Council approved a revised bill on the Swiss Corporate Tax Reform III. The bill as amended by the National Council includes elements that enhance the attractiveness of Switzerland's tax environment for companies, most notably around the mandatory introduction of a patent box at the cantonal level. The parent box regime will create an incentive for companies to keep existing patents in the country and encourage the relocation of high-value jobs into the country to develop innovative new patents.
April 15, 2016 — The Turkish Tax Administration (TTA) announced a new Draft General Communiqué numbered 3 on Disguised Profit Distribution through Transfer Pricing.
The Draft General Communiqué indicates that Turkey will adopt a three-tiered approach — master file, local file, and CbC reporting template — for its transfer pricing reporting requirements. According to the Draft General Communiqué, the newly announced CbC reporting requirements will be applicable in Turkey for the financial year 2016 and are to be submitted by the end of 2017. The Turkish CbC guidelines follow the OECD guidelines, including the Turkish Lira equivalent of 750 million euro. In addition, surrogate parent entity rules apply for local filings in Turkey.
March 16, 2016 — The Turkish Revenue Administration (TRA) released on its website a Draft General Communiqué no. 3 on Disguised Profit Distribution through Transfer Pricing(Draft Communique) that would implement the new transfer pricing reporting requirements for multinational enterprises in line with OECD BEPS Action 13. According to the Draft Communique, Turkey would implement the three tier approach including a master file, a local file, and a CbCR template. The Draft Communique is open for public comment and comments are due by March 31, 2016.
The CbCR template would be required for financial years starting on or after January 1, 2016 from entities that are part of a multinational group with annual consolidated revenue exceeding TRY2.037 Million (approximately €750 million). The report would be filed within 12 months from the end of the fiscal year it relates to by the Turkish resident parent company of a qualifying group, or by the local Turkish subsidiary, if the parent company of the group is resident in a jurisdiction that does not have an agreement for automatic exchange of the CbC reporting template with Turkey or does not require the filing of CbC reporting information for the relevant year.
Turkish subsidiaries of multinational groups with assets on the balance sheet and net sales revenue in the income statement of at least TRY250 million, will be obliged to prepare a Master file by the end of the second month following the filing deadline for the corporate tax return. The master file would include an overview of the multinational group's business operations, transfer pricing practices, organizational structure, its intangibles and intercompany financial activities, its financial and tax positions, and a description of the group's businesses. It would be submitted upon request.
Select Turkish subsidiaries would also be required to file a local file, which focuses on material related party transactions. The local file is planned to be composed of three different components, each of which would be due depending on certain criteria, such as transaction amounts, balance sheet assets and net sales revenue or corporate taxpayer status. The local file components should be submitted to the tax authority within two months from the deadline for filing the corporate tax return or filed upon request.
February 27, 2016 — The United Kingdom has officially joined the group of countries requiring country-by-country (CbC) reporting for years beginning on or after January 1, 2016. The requirements and effective dates included in the regulations generally adhere to those included in the OECD's report on action 13 (transfer pricing documentation).
The regulations adopt the action 13 report's precise filing threshold of €750 million in consolidated annual revenue rather than an equivalent amount in local currency (£586 million in the draft regulations). As Mike Williams, HM Treasury's director of business and international tax, explained at a February 12 Tax Council Policy symposium, there's no reason why the threshold must be stated in domestic currency and using the exact amount recommended by the OECD may help avoid problems that could result if countries adopt different amounts.
Under the regulations, a U.K. entity, a ("surrogate parent entity") other than the ultimate parent of the multinational group has the option to file on the group's behalf if the parent's jurisdiction doesn't require CbC reporting, hasn't agreed to automatic exchange of reports with the United Kingdom, or the arrangements to exchange reports with that jurisdiction aren't operating effectively. Local filing is mandatory under those conditions if the group doesn't file a surrogate report in another country that has an effective automatic exchange agreement with the United Kingdom. When triggered, the local filing requirement applies to the "top U.K. entity," or the entity that is required (or would be required if its shares were traded on a public exchange) to include other U.K. group entities in its consolidated financial statements. The surrogate reporting option may give U.S. multinationals with U.K. subsidiaries a way to avoid triggering local reporting requirements in multiple jurisdictions for the "gap year" that will result from the delayed implementation of CbC reporting in the United States.
June 29, 2016 — The U.S. Treasury Department (Treasury) and Internal Revenue Service (IRS) released much-anticipated final regulations (TD 9773) on country-by-country (CbC) reporting (the Final Regulations). The Final Regulations apply to reporting periods of ultimate parent entities of U.S. multinational enterprise (MNE) groups that begin on or after the first day of the tax year of the ultimate parent entity that begins on or after July 1, 2016.
The Final Regulations adopt, with some changes Treasury regulations issued in proposed form (REG-109822-15) on 21 December 2015 (the Proposed Regulations). In general, the Final Regulations are modeled on the Organisation for Economic Co-operation and Development (OECD) recommendations for CbC reporting under Action 13 of the OECD and G20 Base Erosion and Profit Shifting (BEPS) project, with some modifications.
Under the Final Regulations, ultimate parent entities of a U.S. MNE group with annual revenue of $850 million or more for the immediately preceding accounting period must file Form 8975, "Country-by-Country Report," containing information, on a country-by-country basis, related to the U.S. MNE group's income and taxes paid, together with certain indicators of economic activity within the U.S. MNE group.
June 2, 2016 — The U.S. intends to meet its self-imposed June 30 deadline to finalize its rules on country-by-country reporting (CbCR), a Treasury official said. Robert Stack, deputy assistant secretary for international tax affairs at the Treasury Department, said June 2 that it is unusual for the IRS and Treasury to make a fixed deadline, "but that was part of our negotiating with other countries to get a way to smooth the path."
Stack said Treasury is trying to avoid "this hiccup of people having to file in other countries in 2016, even though our regulations will be effective for taxable years after they are finalized." Once finalized, the regulations will be effective for companies with tax years beginning July 1, Stack told a Federal Bar Association insurance tax seminar in Washington. Stack said other countries, particularly European countries, will require the country-by-country report for taxable years as of Jan. 1, 2016, so Treasury has been working with the IRS to accept voluntary filings going back to that date.
"That fact will not be referenced in the regulations to be finalized at the end of this month, and that is because we are still working on some of the ways that we are going to manage the voluntary filing going forward," Stack said. However, "the problem on the other side is you need countries that will then accept the voluntary filing as if it was required for purposes of satisfying their laws," Stack said. The IRS issued proposed regulations on December 18 requiring large companies to report information, including the amount of revenue, profit or loss, capital and accumulated earnings for each country of operation, generally consistent with the Organization for Economic Cooperation and Development's recommendations designed to combat base erosion and profit shifting (245 DTR G-4, 12/22/15).
Stack said the OECD is working on putting together one package that "will announce both countries that will accept voluntary filing and countries that will take it as satisfying the requirements of their laws so that companies do not have to do a local filing." The idea is "one smooth template that you could use, starting with Jan. 1, 2016, years," Stack said. "My fingers are crossed because I am waiting for other countries to come along and sign up." Stack said the final regulations will include some changes to the proposed version. First, the final regulations will clarify that U.S. possessions are considered to have fiscal autonomy and must be separately reported, Stack said. "It is a kind of unique U.S. issue and we had to plug that gap." Second, the final regulations will clarify that a company with headquarters in a U.S. territory, or possession, can file the CbCR with the IRS.
December 24, 2015 — Legislation introduced on Tuesday by U.S. Rep. Charles Boustany (R-LA) would safeguard companies in complying with country-by-country reporting requirements recommended by the OECD. The Bad Exchange Prevention Act follows the issuance by the Treasury Department on Monday of proposed regulations regarding country-by-country ("CbC") reporting requirements in line with the OECD's Base Erosion and Profit Sharing (BEPS) Action Plan 13.
Countries would be required under CbC reporting to disclose more financial, tax and transfer pricing information to tax authorities. Action 13 also requires the filing of a master file containing all relevant information, a local file specifically referring to local intercompany transactions, and a country-by-country report detailing information on the global allocation of corporations' income and taxes. Critics of the proposed regulations warn that the authority of the Internal Revenue Service to request and obtain such information for BEPS purposes is questionable and that sensitive data could be placed in jeopardy if foreign governments conduct fishing expeditions to obtain it.
Under Boustany's legislation, exchange of country-by-country reporting of U.S. companies from the U.S. Treasury Department to any foreign jurisdiction would be delayed until 2017. The proposed legislation also establishes that the Treasury Department will suspend reporting to any nation found to either be abusing master file documentation or failing to safeguard the confidentiality of information in the master file.
December 21, 2015 — The U.S. Treasury Department issued proposed regulations implementing country-by-country (CbC) reporting, a major plank of the OECD's project to combat base erosion and profit shifting.
Proposed regulation 1.6038-4 (REG-109822-15) would apply to U.S. parent companies—those with at least $850 million in annual revenue for the preceding annual accounting period—for the taxable year beginning on or after the rules are made final, ensuring that, for most companies, the rules wouldn't take effect before Jan. 1, 2017. While most adopting countries allow for a due date of twelve months after the prior year end, the U.S. proposal requires the form to be filed with the company's U.S. tax return. Far from being finalized, the proposed regulation will now undergo the standard rule implementation process, starting with an invitation for comments from the public on all aspects of the proposed rules and provides the opportunity for the public to request a public hearing. Unless hurried by other procedural means, and barring any challenges or interventions, the proposed rules will then become effective as temporary, or interim regulation, before the final regulations are publicly issued.
Model country-by-country rules were developed by the OECD as part of its effort to curb tax avoidance by multinational corporations. Recommendations released by the organization Oct. 5 would require companies with annual consolidated group revenue of €750 million ($819 million U.S.) or more to submit a report denoting their global allocation of income, taxes and other indicators of economic activity to the tax authority in the country in which the ultimate parent company resides. That information will then be shared, through treaty information exchange networks, with all countries in which the company and its affiliate groups operate and conduct business.
October 9, 2015 — Two U.S. Treasury Department representatives have, again, announced the Treasury's intention to adopt CBC Reporting. On an October 7th PwC webcast, U.S. Treasury Financial Economist, Michael McDonald, said that "the U.S. will be implementing this (CBC Reporting) and we're preparing regulations to implement the CBC template in a manner very similar to what was released by the OECD for tax year 2016." Then, at an October 9th Deliotte webcast U.S. Treasury Deputy Assistant Secretary for international affairs, Bob Stack similarly stated that "...we have been saying all along that we expect the (CBC Reporting) regulations to track very closely to the OECD guidance so that company's could get a head start on that and we still intend to put out regulations before the end of the year to do that."
Despite the apprehension by U.S. based multinationals regarding the potential for BEPS-related legislative activity, such firms will be affected by the BEPS related changes that may be adopted in the near term through Treasury actions (such as country-by-country reporting), as well as by the adoption of BEPS action plans in the jurisdictions in which they do business.
October 2, 2015 — The U.S. has agreed to participate in discussions regarding the development of a multilateral instrument under Action 15 of the OECD project to combat BEPS, a Treasury Department official said.
Robert Stack, U.S., Deputy Assistant Treasury Secretary for International Tax Affairs, told Bloomberg BNA today that the U.S. "arrived at this conclusion because it is the best way for the United States to advance its interests in mandatory binding arbitration as the optimal method for resolving disputes and improving tax administration."
Stack added that a decision to participate in the multilateral discussions "by no means foreshadows any decision about whether to eventually join in signing such an instrument." The U.S. official noted that the department would be consulting as appropriate with Congress "as the process moves along."
September 22, 2015 — Rep. Kevin Brady (R-Texas) said the Treasury Department doesn't have the authority to require CbC reporting by U.S. multinationals to share employee, revenue and tax data with foreign countries. Brady, a senior member of the House Ways and Means Committee, said Congress has the authority to approve—or reject—the disclosure program that is a key tenet of the OECD's BEPS project that seeks to increase transparency between companies and tax authorities.
August 27, 2015 — The Chairmen of the U.S. House Ways and Means Committee and the Senate Finance Committee sent a letter to the U.S. Secretary of the Treasury noting their plans to require CbC reporting and reiterated the question raised in their June 2015 letter about Treasury's authority to do so. The letter requests that Treasury provide a legal memorandum and other documentation regarding the authority to require such reporting and the intended uses for such information by the IRS.
*To see the full list of jurisdictions that currently participate in the OECD's Convention on Mutual Administrative Assistance in Tax Matters click here. (As of 05/30/17)
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