New BEPS guidance on country-by-country reporting and implementation

New information on country-specific CbC reporting should give more certainty to tax administrations and multinationals.

On 5 December 2016, the OECD released further guidance on Country-by-Country (CbC) reporting and country-specific information on implementation of the guidance. CbC reporting is linked to action point 13 in the Base Erosion and Profit Shifting (BEPS) initiative.

Background on BEPS

Base erosion and profit shifting are tax avoidance strategies mostly used to exploit loopholes within the tax/legal environment by shifting profits from one specific country to a country with low or no tax, where, in most cases, the company has no or little economic activity.

Currently over 100 countries and jurisdictions have, or will, implement regulations to address base erosion and profit shifting as part of the OECD’s initiative to counter fight these practises. Both the OECD and the participating countries issued a report in 2015 containing the so-called 15 action points to be taken into consideration and implementation by countries when dealing with BEPS. The main focus of these action points is to identify and neutralise gaps and mismatches in tax rules across the countries, and facilitate increased exchange of tax information between jurisdictions to improve tax compliance.

New rules and regulations along the way

The implementation of BEPS-related laws and regulations is a rolling process, as each country is implementing BEPS action points with different views, interpretations and timelines. The OECD is continuously providing additional guidance on how these action points should be interpreted and suggesting best ways for them to be implemented.

As part of such, on 5 December 2016 the OECD released further guidance on CbC reporting and country-specific information on implementation of the guidance, specifically:

  • Key details of jurisdictions’ legal framework for CbC reporting
  • Additional interpretive guidance on the CbC reporting standard.

In short the new information on country-specific reporting should give more certainty to tax administrations and multinationals on how to implement CbC reporting. It affects the timeline when CbC reporting has to be done, whether surrogate filling and voluntary filling is available for specific countries and if local CbC filing is required. Furthermore it contains information on the implementation of international exchange of CbC reports between country tax administrations.

The guidance tackles the case where notification to the country tax administration involves identifying the reporting entity within the multinationals’ structure, and how, once identified that such a notification is required it’s up to the jurisdictions to set a due date for acting upon it, thus providing some flexibility. This will be relevant while jurisdictions transit through the finalisation of their local implementation of CbC reporting and multinationals adapt to the new norms.

Talk to us

New jurisdictions are joining, current participating ones are implementing related local regulations and multinationals are faced with continuous reminders of their need to look out for the changes, understand them, embrace them and adhere to them.

Our experts are here to help. We provide services addressing the concerns from the OECD’s BEPS initiative. We assist clients with their BEPS reviews, their notification duties, the implementation of Local and Master file depending on their country and structure, understanding challenges within their transfer pricing documentation and other related services.

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