New Obligations to Large Multinational Enterprise Groups
Country-by-Country (CbC) reporting rules proposed by the Organisation for Economic Cooperation and Development have been adopted to Lithuanian legislation as from 5 June 2017.
The purpose of the CbC report is to assist the tax administrators in identifying enterprises or groups, which are likely to transfer taxable profit to countries with a lower corporate income tax rate or preferential tax regimes from the countries, in which profit generating activities are actually held and products or services are made.
Based on the new Lithuanian CbC reporting rules Lithuanian parent company of the multinational enterprise (MNE) group is obliged to submit a CbC report to the State Tax Inspectorate under the Ministry of Finance of the Republic of Lithuania (STI under MF), if consolidated revenues of the MNE group exceed 750 million euros per year. In certain cases parent company of the MNE group can pass an obligation to submit a CbC report to another company of the MNE group (surrogate parent company).
CbC report submitted to the tax authorities should include the country-specific information regarding financial and other operational results of the MNE group companies. Information should be divided into two separate tables:
- The first table should include revenues, taxes paid and overview of other financial indicators of the MNE group segregated by country.
- The second table should show the list of all companies of the MNE group and indicate the main business activities of different companies of the MNE group in different countries.
With respect to the enterprises operating in Lithuania, it should be noted that:
- If a company is a parent company or surrogate parent company of the MNE Group, the first CbC report covering the MNE group’s activity in 2016 should be submitted to the Lithuanian tax authorities until 31 March 2018.
- If a company is not a parent company or surrogate parent company of the MNE group, but the group is obliged to submit a CbC report, company operating in Lithuania is obliged to inform STI under MF about the company of the MNE group, which would be submitting the CbC report for the MNE group for year 2016 in a free format notification until the end of year 2017.
It should be noted, that CbC reporting rules are relevant not only for the companies of the MNE group, but also for the permanent establishments of the entities of the MNE group. Information related to the permanent establishment should be attributed to the country in which permanent establishment is constituted, rather than to the country of the entity constituting the permanent establishment.