As part of the move to improve the levels of transparency in international tax matters and reduce aggressive tax avoidance by multinational companies, the OECD has released a package of measures for the implementation of a new country-by-country reporting plan developed under the OECD/G20 Base Erosion & Profit Shifting (BEPS) project
The Country-by-Country Reporting Implementation Package will provide a consistent and swift implementation of new transfer pricing reporting standards developed under Action 13 of the BEPS Action Plan, ensuring that tax administrations obtain a complete understanding of the way multinational enterprises (MNEs) structure their operations, while also ensuring that the confidentiality of such information is safeguarded.
Action 13 of the BEPS Action Plan recognised that enhancing transparency for tax administrations, by providing them with information to assess high-level transfer pricing and other BEPS-related risks, is crucial for tackling base erosion and profit shifting.
Country-by-country reporting requirements will require MNEs to provide aggregate information annually, in each jurisdiction where they do business, relating to the global allocation of income and taxes paid.
The report will also include other indicators of the location of economic activity within the MNE group, as well as information about which entities do business in a particular jurisdiction and the business activities each entity engages in.
The implementation package consists of model legislation requiring the ultimate parent entity of an MNE group to file the country-by-country report in its jurisdiction of residence, including backup filing requirements when that jurisdiction does not require filing.
There are also three Model Competent Authority Agreements to facilitate the exchange of country-by-country reports among tax administration. These are based on the Multilateral Convention on Administrative Assistance in Tax Matters, bilateral tax conventions and Tax Information Exchange Agreements (TIEAs).
The package was approved by the countries participating in the OECD/G20 BEPS Project at the last meeting of the OECD Committee on Fiscal Affairs, held on 27-28 May.
For further information on Action 13: Guidance on the Implementation of Transfer Pricing Documentation and Country-by-Country Reporting, click here
Initial background and information on Guidance on the Implementation of Transfer Pricing Documentation and Country-by-Country Reporting Proposals was published in February 2015.