BEPS: The CbC Reporting Template Requirements

As I noted in my previous BEPS post, Country-by-Country (CbC) reporting is one of the most critical elements of BEPS Action 13 - Re-examining Transfer Pricing, and is likely to be widely adopted by many countries. In this post, I will discuss the specific data elements required, as outlined in the September 2014 Report on Action 13 (specifically Annex III), the February 2015 Implementation Guidance and the June 2015 Implementation Package, all issued by the OECD.

The OECD's recommended CbC reporting template requires MNEs 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, as well as information about which entities do business in a particular jurisdiction and the business activities each entity engages in.

On the first page of the report, MNEs (that meet the filing threshold discussed later) must provide the following data by tax jurisdiction:

  1. Revenues, including a breakdown of amounts received from unrelated and related parties;
  2. Profit or loss before income tax;
  3. Income taxes paid (including certain withholding taxes);
  4. Income taxes accrued for the current year (excluding uncertain tax liabilities);
  5. Stated capital;
  6. Retained earnings;
  7. The number of employees; and
  8. Tangible assets (excluding cash and cash equivalents).

Page two of the report further requires MNEs to identify each legal entity and permanent establishment within the MNE group, their country of incorporation, tax residency and principle business activities.

Under the current OECD guidelines, only MNEs with consolidated revenues exceeding €750 million would be required to file a report, but this threshold is expected to be lowered over time. Generally, the report is filed in the tax jurisdiction of the ultimate parent entity, but the June 2015 Implementation Package provides for a "secondary mechanism" that effectively transfers the filing obligation to lower-tier entities.

The OECD has recommended that initial CbC reports be filed for years beginning on or after January 1, 2016, which means they would be due in December 2017.

While the data elements required on the CbC template may, on the surface, seem "not too bad," it is important to note that countries will have the freedom to request additional data for their reports. Even more important is the reality that, for some MNEs, gathering this data at the tax jurisdiction level may prove to be quite difficult. These data-gathering challenges and some practical approaches to solving them will be the subject of my next post.

Read Bill's previous post on this topic; BEPS: Country-by-Country Reporting Implementation.

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Bill Brennan

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William Brennan was formerly a Chief Tax Officer at Vertex, Inc. He has over 33 years of tax experience with a record of building, developing, and leading large corporate tax departments. Bill has worked in many industries throughout his career including healthcare, software, financial services, transportation and manufacturing. His tax practice experience has included planning, intercompany transfer pricing, structuring/restructuring of business operations, offshore intangibles, contract manufacturing, cross-border financing, mergers and acquisitions, legislation, private letter rulings, examinations, administrative appeals, and litigation. As a former Vertex Chief Tax Officer, Bill provided insight and thought leadership regarding in-house corporate tax department operations, global tax law and policies, and emerging tax industry trends. In addition, Bill advised Vertex’s Board of Directors and senior management on the development of the company’s income tax solutions under Vertex Enterprise. Prior to working at Vertex, Bill was the Vice President-Taxes at McKesson Corporation for 12 years. McKesson Corporation is a Fortune 15 company with revenue in excess of $130 billion, and is the largest pharmaceutical distributor and health care information technology company in North America. In addition, Bill has held senior leadership roles for a number of other Fortune 500 companies throughout his career. Bill received a Master of Science in Taxation from Golden Gate University and a Bachelor’s degree in Accounting from Marquette University. He is a licensed CPA and a member of the AICPA, IFA and USCIB.

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