The guidance relates to action 13 of the OECD’s Base Erosion and Profit Shifting (BEPS) report. Under new CBCR rules, 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.

The OECD’s guidance covers four areas where it says questions have already arisen about how this will operate in practice. These are transitional filing options for multinationals that voluntarily file in the parent jurisdiction (‘parent surrogate filing’); the application of CBRC to investment funds; the application of CBRC to partnerships; and impact of exchange rate fluctuations on the agreed €750m (£619m) filing threshold.

The OECD says that where jurisdictions are implementing CBCR  but will not be able to implement with respect to the fiscal period commencing from 1 January 2016, there is a transition issue. In such situations this can be addressed by allowing the ultimate parent entities of a multinational group to voluntarily file in their jurisdiction of tax residence, subject to various conditions which the guidance outlines.

Japan, Switzerland the US have confirmed they will have parent surrogate filing available consistent with this framework for ultimate parent entities that are resident in their jurisdiction, with respect to fiscal periods commencing on or from 1 January 2016.

The guidance says that, generally, accounting consolidation rules will determine whether or not a multinational entity is classified as an investment fund and provides examples. It goes on to state: ‘It is still possible for a company, which is owned by an investment fund, to control other entities such that, in combination with these other entities, it forms a multinational group. In this case, and if the multinational group exceeds the revenue threshold, it would need to comply with the requirement to file a CRCR report.’

There is also detailed guidance on how  a partnership which is tax transparent and thus has no tax residency anywhere should be included in CBCR, as well as the rules applying to a reverse hybrid partnership, which is tax transparent in its jurisdiction of organisation but considered by a partner’s jurisdiction to be tax resident in its jurisdiction of organisation.

In addition, the OECD addresses the question of currency differentials and fluctuations when calculating the filing threshold, currently set at €750m or a near equivalent in domestic currency as of January 2015.

This is in response to concerns that a multinational group could end up being asked to file in one country in which it operates, because its revenues are above €750m when translated into the local currency, but not in a neighbouring jurisdiction when the conversion is carried out in a different currency.

The OECD advises that provided that the jurisdiction of the ultimate parent entity has implemented a reporting threshold that is equivalent, a multinational group that complies with this local threshold should not be exposed to local filing in any other jurisdiction that is using a threshold denominated in a different currency.

The guidance states there is no requirement for a jurisdiction using a threshold denominated other than in euros to periodically revise this in order to reflect currency fluctuations.

The OECD goes on to say that the appropriateness of the €750m threshold may be included in the review of the CBCR minimum standard, which is set to occur in 2020. 

The OECD’s guidance on the implementation of CBCR BEPS action 13 is here.