The OECD today released additional guidance for tax administrations and multinational groups on the implementation and operation of country-by-country reporting. The OECD also released a summary of fourteen common errors made by multinational groups when preparing country-by-country reports.
Country-by-country reporting was developed by countries in 2015 in response to action 13 of the OECD/G20 base erosion profit shifting (BEPS) plan. The scheme requires all large multinational enterprises to prepare a country-by-country report with aggregate data on the global allocation of its income, profit, taxes paid and on its economic activity in tax jurisdictions in which it operates.
The reports are shared with tax administrations to aid in the assessment of whether a multinational is avoiding tax through inappropriate transfer pricing or other means.
Today’s guidance, approved by a coalition of more than 130 countries known as the “Inclusive Framework on BEPS,” addresses the appropriate treatment of dividends for purposes of “profit (loss) before income tax”, “income tax accrued (current year)”, and “income tax paid (on cash basis)” in table 1 of a multinational group’s country-by-country report.
The guidance also covers several issues related to local filing, including whether a jurisdiction can apply local filing where the ultimate parent entity of a multinational is not required to file a country-by-country report in circumstances where a country-by-country report would be required in the local jurisdiction; whether, in applying local filing, a jurisdiction should accept a country-by-country report containing information as prepared for filing in the ultimate parent entity jurisdiction; and whether local filing should be required no earlier than 12 months after the end of the MNE group’s reporting fiscal year.
The use of rounded amounts in table 1 of a multinational group’s country-by-country report is also addressed, as is the information that should be provided on sources of data used.
Today’s release also included a summary of fourteen common errors made by multinational groups in preparing the country-by-country reports. This information is posted on the OECD website and discusses topics such as rounding errors and the inappropriate use of multiple currencies in the reports.
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