Country–By–Country reporting and other tax return disclosures

Learning CentreCountry–By–Country reporting and other tax return disclosures

Country-By-Country reporting and other tax return disclosures

Country-by-country reporting applies to Australian businesses whose total global annual revenue exceeds A$1 billion. They must provide a CbC report with information on the global allocation of income and taxes, and also the location of economic activity. The reports must be provided within 12 months of the end of the entities’ income year.

The ATO’s international benchmark processes use internationally agreed benchmarks to compare corporate structures and transactions involving connected entities in order to apply the arm’s length principle in the taxation of multinationals. The IDS contains detailed information on the type of transactions, structures, group financing and transfers of tangible and intangible property, ownership and provision of services, and transfers in ownership, made by members of a multinational group

One of the important parts of the ATO’s monitoring of related party transactions and the application of the arm’s length principle is the information in an entity's annual information statement (formerly known as the income tax and corporate tax returns).

This document requests significantly more detail on the types of transactions—tangible and intangible property, services, and financial arrangements, as well as restructures and so on—than can be found in CbC reports. The ATO uses this data to risk–assess the thousands of entities that lodge IDS and or CbC reports in order to select candidates for further risk review or audit.

For tax entities are also required to lodge a reportable tax position (RTP) schedule. Public companies and foreign-owned companies with a group income of AUD 250 million or more are notified by the ATO. This schedule requires these taxpayers to report on the tax positions they take that, in their opinion, create uncertainty in their financial accounts in relation to taxation.

There are currently 35 questions relating to reportable tax positions, some of which relate to tax avoidance, profit shifting, and other practices that pose a systemic risk to Australia’s corporate tax base.

The schedules’ transfer pricing questions relate to arrangements that create transfer pricing compliance risks, including base erosion, inappropriate profit transfers, global value chains, rebasing, intercompany transactions, and financial transactions. Many of these required transfer pricing disclosures are supported by the ATO’s practical compliance guides or taxpayer alerts to assist taxpayers in identifying the necessary arrangements.