Country-by-country reporting (CbCR)

The confluence of the OECD’s actions relating to Base Erosion & Profit Shifting (BEPS) combined with unilateral country legislation, increased sharing of information between tax authorities in different countries, and the pressure on governments to address high levels of sovereign debt are culminating in sweeping changes to tax laws and treaties. This is triggering a widespread Global Tax Reset for businesses with worldwide operations.

One of the cornerstones of the OECD’s action plan is a Country by Country Reporting (CbCR) requirement that is detailed in Action 13.

This paper addresses:

The basics

• Who will be subject to CbCR?
  CbCR applies to multinational companies (MNCs) with a combined revenue of euros 750 million or more.
• What is CbCR and what is a CbC report?
  Country-by-Country Reporting (CbCR) is part of the OECD’s Base Erosion and Profit Shifting (BEPS) Action Plan 13. In essence, large multinationals have to provide an annual return, the CbC report, that breaks down key elements of the financial statements by jurisdiction. A CbC report provides local tax authorities visibility to revenue, income, tax paid and accrued, employment, capital, retained earnings, tangible assets and activities.
• When will CbCR be implemented?
  This depends on when countries implement CbCR into their own legal system, but the intention is that reports will be are required for the fiscal years starting on or after the 1st of January 2016 (FY16) and should be filed within 12 months of the relevant year end.
• When will CbC reports need to be filed?
  CbC reports will need to be filed 12 months after the fiscal year has ended, starting with the first financial year starting after 1 January 2016.
• Where is a CbC report filed?
  CbC reports are primarily to be filed where the parent company is headquartered (HQ). If the HQ country has not implemented CbCR, MNCs should file in the country with CbC reporting where their most significant activities occurs.
• Why are CbC reports needed?
  CbCR provides tax authorities information to help them assess transfer pricing risks and make determinations on how they allocate tax audit resources.
• Are there other trends are emerging?
  Additional reporting obligations are being implemented in both the banking and extractive industries sectors. Other sectors may follow. In addition, some jurisdictions have proposed initial discussions to consider obligatory public disclosure of CbCR requirements for MNCs.

When should a business begin taking action?
As soon as possible, businesses should gauge readiness to collecting and aggregating the data needed under new CbCR requirements.

How much time will it take to implement a data solution?
Setting up a system and well-planned data aggregation process takes time. In our experience it can typically take companies between 6-9 months to implement a centralized data collection process if one did not previously exist.

How can business automate the CbCR process?
A well planned, technology-enabled approach can help businesses to automate an end-to-end CbCR reporting process as well as enhance organizational efficiencies.

What strategic opportunities stem from CbCR compliance requirements?
Using tax data analytics, business leaders can extract new organizational insights and correlations from CbCR data which can be leveraged in strategic planning purposes.