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.
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:
- Multilateral Convention on Administrative Assistance in Tax Matters;
- Bilateral tax conventions; and
- Tax Information Exchange Agreements (TIEAs).
Since the Action 13 Report was released, jurisdictions have made great efforts to establish the necessary domestic and international legal and administrative frameworks for the filing and exchange of CbC Reports in accordance with the Action 13 minimum standard and the global landscape for CbC Reporting by MNE groups is still evolving. This initial period may be challenging for both tax administrations and MNE groups seeking to be compliant with CbC Reporting, which may call for a pragmatic approach that takes into account best efforts made to comply with CbC related obligations. These challenges should diminish over time, as the global landscape for CbC Reporting becomes more settled and both tax administrations and MNE groups gain in experience.
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 by jurisdictions of a domestic legal framework for CbC reporting, on the international framework for the exchange of CbC reports and on steps taken by jurisdictions to reduce the incidence of local filing by constituent entities in MNE groups.
- CbC reporting: Update on implementation and on exchange relationships
- Activated exchange relationships for CbC reporting
- Country specific information on CbC Reporting
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.
In 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.
A 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.
- List of CbC MCAA signatories (PDF)
- Text of the MCAA on the Exchange of Country-by-Country Reports (PDF)
- List of activated relationships for the automatic exchange of CbC Reports
The OECD's Inclusive Framework on BEPS has released a number of guidance and 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 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. Also available is a compilation of the approaches adopted by jurisdictions, in cases where guidance provides flexibility.
- Access the report and the compilation of approaches (Both available in various languages)
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.
- Access the report (Available in various languages)
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.
- Access the report (Available in various languages)
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.
- Access the report (Available in various languages)
The 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.
The first annual peer review, which focused mainly on the domestic legal framework of each reviewed jurisdiction, was carried out from February 2017 to February 2018. The first annual peer review report which includes the results of this process was approved by the Inclusive Framework in April 2018 and was subsequently published on 23 May 2018.
The second annual peer review was launched in April 2018 and is expected to be completed in the second quarter of 2019.
- 24/01/2019 - Panama becomes 77th signatory of the Multilateral Competent Authority Agreement on the Exchange of Country-by-Country Reports (CbC MCAA)
- 10/12/2018 - The Bahamas becomes 76th signatory of the Multilateral Competent Authority Agreement on the Exchange of Country-by-Country Reports (CbC MCAA)
- 27/09/2018 - OECD and SAT hold joint workshop on the experience of country-by-country reporting of tax information
- 13/09/2018 - OECD releases further guidance for tax administrations and MNE Groups on Country-by-Country reporting
- 24/05/2018 - OECD peer reviews on BEPS Action 13 Country-by-Country Reporting initiative show strong progress for global roll-out in June
- 08/02/2018 - OECD releases further guidance for tax administrations and MNE Groups on Country-by-Country reporting
- 21/12/2017 - BEPS Action 13: Jurisdictions implement final regulations for the first filings of CbC reports, with over 1400 bilateral relationships now in place for the automatic exchange of 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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