New OECD country-by-country reporting guidance provides for voluntary filing

The OECD today issued further guidance implementing the new transfer pricing documentation and country-by-country (CbC) standards of action 13 the OECD/G20 base erosion profit shifting plan.

The guidance is designed to ensure consistent implementation of the new standards, addressing:

• Transitional filing options for MNEs that voluntarily file in the parent jurisdiction;
• Guidance on the application of CbC reporting to investment funds;
• Guidance on the application of CbC reporting to partnerships; and
• The impact of exchange rate fluctuations on the agreed EUR 750 million filing threshold for MNE groups.

The report sanctions the use of “parent surrogate filing” for countries that have a country-by-country legal framework in effect for periods later than January 1, 2016, but agree to accept and exchange CbC reports voluntarily filed by their parent corporations for taxable years beginning on or after January 1, 2016.

The report states that when there is surrogate filing and other listed requirements are met, there should be no additional local filing requirements in the jurisdiction where the MNE has a constituent entity.

Japan, Switzerland, and the US have confirmed that they will have parent surrogate filing consistent with the framework outlined in the report.

The report also confirms that applicable accounting consolidation rules will determine the extent to which an investment fund’s investee companies are part of the investment fund’s group.

Accounting consolidation rules also apply to determine if a partnership may be a constituent entity of an MNE group subject to CbC reporting, the report says.

Instructions on how to account for partnerships that are stateless entities are also provided, and it is advised that the MNE explain in the notes section of the report if a partnership’s stateless income is taxed in the partner jurisdiction.

The guidance also points out that if the jurisdiction of the ultimate parent entity has implemented a reporting threshold equal to the agreed threshold for filing of EUR 750 million or a near equivalent amount in domestic currency as of January 2015, an MNE group that meets this threshold should not be exposed to local filing in another jurisdiction that uses a different currency.

There is no requirement for jurisdictions using threshold amounts denominated other than in euros to revise this amount to reflect currency fluctuations, the guidance states.

See:

• Guidance on the Implementation of Country-by-Country (CbC) Reporting.