Because of its inherent importance as an initial audit risk assessment tool, one must assume that the template will serve as part of the transfer pricing analyses and reconciliations needed once a transfer pricing audit is invoked by the various taxing authorities. As a result, companies should expect inquiries (and thereby additional time required to respond to these initial inquiries) regarding the information being provided in the CbC reporting templates. In addition, full-scale audits should also be anticipated based on whether a company has a tax presence in a particular country in which income tax returns are not being filed. Also, expect increasing audits from emerging and developing countries. Since these countries rely heavily on tax revenue from multinational companies to fund their government programs, and since much of this CbC reporting information was not available to their taxing authorities in the past, additional tax audit management resources will likely need to be devoted to these countries.
Please remember that the Tax Matters provides information for educational purposes, not specific tax or legal advice. Always consult a qualified tax or legal advisor before taking any action based on this information.
Nancy Manzano is a Director in the Chief Tax Office at Vertex, responsible for insight and thought leadership regarding in-house corporate tax department operations, spanning income, global and transaction tax. A seasoned tax professional, Nancy is a licensed C.P.A., has a B.S. in business administration from Drexel University and an M.S. in taxation from Widener University.