The new guidance includes questions and answers on the treatment of dividends received and the number of employees to be reported in cases where a multinational uses proportional consolidation in preparing its consolidated financial statements, which apply prospectively.

The OECD says that while action 13 clarifies that the dividends from other constituent entities (CEs) are excluded from ‘revenue’, it does not provide specific instructions as to whether or not dividends from other constituent entities are excluded from ‘profit (loss) before income tax’, and is concerned jurisdictions may have taken different approaches.

The guidance allows jurisdictions flexibility as to how to treat the dividends. Where applicable accounting rules allow a CE in a multinational group to include its share of the earnings of another constituent entity in profit before tax in its entity financial statements, and this share is included in ‘profit (loss) before income tax’ in table 1, this should be indicated in table 3 with information about which jurisdictions.

Where the financial data of a constituent entity is reported on a pro-rata basis, the number of employees of the constituent entity should also be reported on a pro-rata basis, the guidance now states.

The updated guidance also clarifies that shortened amounts should not be used in completing table 1 of a country-by-country report and contains a table that summarises existing interpretative guidance on the approach to be applied in cases of mergers, demergers and acquisitions.

In addition, the OECD has released details of a set of newly established bilateral exchange relationships under the multilateral competent authority agreement on the exchange of CBCR which relate to Bermuda, Curaçao, Hong Kong (China) and Liechtenstein.

Guidance on the implementation of CBCR, BEPS action 13 is here.

Report by Pat Sweet