Country by Country Reporting

What is Country-by-Country Reporting (CbCR)?

Country-by-Country Reporting is a regulatory requirement introduced by the Organization for Economic Co-operation and Development (OECD) under the Base Erosion and Profit Shifting (BEPS) project. It mandates MNEs with a certain threshold of consolidated annual revenue to provide comprehensive and standardized data on their global activities, including revenues, profits, taxes paid, employees, and tangible assets, for each jurisdiction they operate in. This data is shared with tax authorities, promoting greater transparency and enabling them to assess potential tax risks.

Benefits of Country-by-Country Reporting

  1. Enhanced Tax Transparency: CbCR provides tax authorities with a clearer picture of MNEs' global operations, enabling them to identify potential tax risks and anomalies.
  2. Efficient Risk Assessment: Tax authorities can efficiently assess transfer pricing risks, profit shifting, and potential tax avoidance strategies employed by MNEs.
  3. Combating Tax Avoidance: CbCR helps curb aggressive tax planning and profit shifting practices, promoting fair taxation and protecting the tax base of individual countries.
  4. Global Tax Coordination: The standardized reporting format promotes consistency among tax authorities, facilitating global tax coordination and cooperation.
  5. Improved Compliance: CbCR encourages MNEs to adhere to tax regulations and encourages proactive engagement with tax authorities.

Key Factors and Tips for CbCR Compliance

  1. Applicability Threshold: Understand the revenue threshold that triggers the requirement for CbCR in each jurisdiction where your MNE operates.
  2. Data Collection and Consolidation: Establish robust data collection and consolidation processes to compile accurate and comprehensive CbCR data.
  3. Timely Reporting: Ensure timely and accurate reporting of CbCR data to tax authorities in each relevant jurisdiction to avoid penalties.
  4. Transfer Pricing Documentation: Coordinate CbCR with Transfer Pricing Documentation to ensure consistency in reporting.
  5. Professional Advice: Seek guidance from tax professionals or advisors with expertise in CbCR compliance to navigate the complexities of reporting requirements.

Important Notes about Country-by-Country Reporting

Confidentiality:

CbCR information is generally exchanged between tax authorities and not publicly disclosed, maintaining confidentiality.

Master File and Local File:

CbCR complements the Master File and Local File requirements under BEPS Action 13 for comprehensive transfer pricing documentation.

FAQs about Country-by-Country Reporting:

MNEs with consolidated annual revenue exceeding the threshold specified by each jurisdiction's regulations are generally subject to CbCR.

The Master File provides an overview of the MNE's global business operations, while the Local File provides detailed transfer pricing information specific to each jurisdiction. CbCR complements these reports by offering a high-level view of MNEs' activities in different countries.

Penalties for non-compliance vary by jurisdiction and may include financial penalties or other regulatory consequences.

No, CbCR requirements vary by country, and some jurisdictions may not have implemented it.

Generally, CbCR applies to multinational enterprises operating in multiple jurisdictions rather than domestic companies.

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