Country by country reporting is to be extended to partnerships, HMRC has confirmed in a policy paper outlining amendments to The Taxes (Base Erosion and Profit Shifting) (country-by-country reporting) Regulations 2016
The original legislation released in February 2016 made law the OECD’s guidelines for country by country reporting. The OECD has since released guidance suggesting partnerships should be included in the rules, and the new amendments reflect that.
Under the regime, multinational companies are required 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 group. The rules also call for information about which entities do business in a particular jurisdiction and the business activities each entity engages in.
Alongside extending the original requirements to partnerships, the amendments require a UK entity with an obligation to file a UK country by country report to ask for the information necessary to complete a full report and make a minor change to align the ‘local filing’ requirements with the OECD model.
Country by country reports will need to be filed which cover periods starting on or after 1 January 2016 for companies and partnerships within the scope.
The legislation also introduces a requirement for a UK entity in each multinational group to tell HMRC, annually, which entity in the multinational group will file the country by country report, where and provide the names and unique taxpayer references for all of the multinational group’s UK entities.
A costings projection in the legislation suggests the changes will have a negligible impact on the Exchequer.
Country by country reporting forms a key part of the international armoury against tax avoidance by multinational companies.
It is designed to stop companies putting in place contrived structures which channel profits out of jurisdictions with high economic activity into low tax jurisdictions, driving down the multinational’s overall tax liability.
You can read Amendments to Country by Country Reporting 2017 here.
The Taxes (Base Erosion and Profit Shifting) (country-by-Country Reporting) Regulations 2016 can be read here.
