Are you prepared for the new BEPS and CbC Reporting Landscape?

KnowledgeAre you prepared for the new BEPS and CbC Reporting Landscape?

Are you prepared for the new BEPS and CbC Reporting Landscape?

The Organisation for Economic Co-operation and Development (OECD) released its final report on Action 13, Transfer Pricing Documentation and Country-by-Country Reporting’ on 5 October 2015. This final report included: (1) Template for Country-by-Country (CbC Reporting) and (2) Revised standards for transfer pricing documentation.

The CbC Reporting has created a ‘BEPS wave’ in the industry and has become an area of focus for tax practitioners, with many countries releasing new legislation and reporting requirements for multinational enterprises (MNE).

A recent survey published by TP Week and conducted by The International Tax Review indicated that 78% of tax professionals interviewed consider transfer pricing documentation and CbC Reporting as the priority within the BEPS action plan[1].

With this in mind, below is our guide to what you need to know about CbC Reporting.

What is CbC Reporting?

The CbC Reporting is a new compliance requirement that compels MNEs to disclose new information to tax authorities about the Group and the local entities.

The CbC Reporting is divided into three tables as follows

  • Table I. Overview of allocation of income, taxes and business activities by tax jurisdiction
  • Table II. Requires MNEs to provide annually a list, by legal entity name, of all the Constituent Entities that are resident for tax purposes in each tax jurisdiction. For each Constituent Entity, identification of the main business activity also is required.
  • Table III. Additional Information or explanation necessary to understand the information disclosed

The CbC Reporting means tax authorities will have access to information that they have not seen before. This may result in tax authorities focusing on broader aspects and structures as opposed to concentrating on the local entity only. More information may also increase tax scrutiny and additional questions about the MNE Group in tax reviews and audits.

Key Facts about County-by-Country Reporting

  1. Eleven countries have already introduced CbC reporting legislation that will apply from 1 January 2016. Countries with legislation already in effect are Australia, Spain, UK, France, Ireland, Italy, Japan, Mexico, the Netherlands, Poland and South Africa.
  1. For the 2016 income year, every MNE that is located in a country with CbC Reporting already implemented, and last income year exceeding the local annual consolidated group revenue threshold, will have to prepare CbC Reporting. If the ultimate parent company does not file a CbC Report, the local entity will most likely be required to comply.
  1. The local thresholds are as follows:
  • European countries: MNEs with revenue greater than EURO 750 million
  • Australia: Global group revenue greater than AUD 1 billion
  • Japan: Consolidated group revenue greater than JPY 100 billion
  1. In January 2016, a Multilateral Competent Authority Agreement (MCAA) on the Exchange of CbC Reporting was prepared by the OECD and opened for signature by interested parties (tax authorities via their governing Ministry). To date, it has been signed by 32 countries.[2]  As a result, the Competent Authorities of signature countries will automatically exchange information about the CbC Reporting.

For more information about the CbC Reporting and how can affect your company, please contact our offices in Australia or Singapore.

Transfer Pricing Solutions
on reception@transferpricingsolutions.com.au www.transferpricingsolutions.com.au or Transfer Pricing Solutions Asia on services@transferpricingsolutions.asia www.transferpricingsolutions.asia


[1] http://www.tpweek.com/Article/3476270/INFOGRAPHIC-How-multinationals-are-preparing-for-BEPS.html

[2] Australia, Austria, Belgium, Chile, Costa Rica, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Japan, Liechtenstein, Luxembourg, Malaysia, Mexico, the Netherlands, Nigeria, Norway, Poland, Portugal, Senegal, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland and the UK.

Related Blogs

20 Mar

Transfer Pricing Guidelines for Headquarters in Singapore

Singapore is often a preferred location for setting up headquarters as the door  to conduct business in Asia. The IRAS  has released its views on how Singapore HQ's should plan and implement their transfer pricing framework. Want to know more? Read our article with our views on IRAS TP Guidelines for Singapore HQs. 


READ MORE READ MORE
10 Feb

Malaysia Transfer Pricing Update

The Malaysian Finance Bill 2020 incorporates transfer pricing-related changes to the current Income Tax Act, 1967 (“ITA”). The changes permit significantly greater authority to the Malaysia Inland Revenue Board (“MIRB”) and re-emphasises the importance of transfer pricing compliance, with effect from 1 January 2021.


READ MORE READ MORE
12 Aug '20

ATO issues COVID-19 guidance on AU Transfer Pricing

Thec Covid-19 pandemic has triggered the most severe recession and is causing enormous damage to the world economy. The economic downturn will impact a group’s transfer prices, analysis and documentation, more so with the BEPS Action Plans in place and the high level of transfer pricing scrutiny across the globe.


READ MORE READ MORE