The United Kingdom was one of the first countries to formally commit to introducing CbC reporting and the detailed implementation was given effect through the 2016 Regulations. Since the UK introduced these regulations in February 2016, the Organisation for Economic Co-operation and Development (OECD) has issued further guidance and the EU has agreed a Directive to implement CbC reporting in the EU. The Taxes (Base Erosion and Profit Shifting) (Country by Country Reporting) (Amendments) Regulations 2017 update the CbC reporting rules to take account of these developments.
CbC reports will need to be filed which cover periods starting on or after 1 January 2016 for MNEs that are in scope. The new measure introduces notification requirements which must be made by the end of the period being reported on. However given that the first period covered by the regulations is the year ended 31 December 2016, the amendments require notifications to be received by 1 September 2017 for the first year and by the end of the relevant period in subsequent years.
This new measure updates The Taxes (Base Erosion and Profit Shifting) (country-by-Country Reporting) Regulations 2016 (the 2016 Regulations) which require MNEs to provide HM Revenue and Customs (HMRC) with information about global activities, profits and taxes. The updates are to take account of international developments including by:
- extending the original statutory requirements to partnerships, this amendment was announced in August 2016;
- requiring a UK entity with an obligation to file a UK Country by Country (CbC) report to ask for the information necessary to complete a full CbC report and making a minor change to align the “local filing” requirements with the OECD model;
- introducing a requirement for a UK entity in each MNE group to tell HMRC, annually, which entity in the MNE group will file the CbC report and where and provide the names and unique taxpayer references for all of the MNE group’s UK entities.
Since the 2016 Regulations were introduced the OECD have issued additional guidance clarifying that partnerships should be reporting entities for CbC reporting. This measure also makes a minor adjustment to align the UK’s ‘local filing’ requirements with the OECD model. ‘Local Filing’ will only be required if the parent jurisdiction of the foreign MNE has entered an international agreement which allows for exchange of information but has not entered into specific arrangements to exchange CbC reports.
In addition the EU has amended the Council Directive on Administrative Cooperation 2011/15/EU to implement an EU version of the OECD recommendations (known as DAC4). DAC4 results in the following changes to the regulations.
Firstly there is now a requirement on a UK entity in each MNE group that is within the scope of CbC reporting to tell HMRC annually which entity in the MNE group will file the CbC report and where. The amendments also require the entity to provide the names and unique taxpayer references for all of the MNE group’s UK entities.
The notification is to be made by the end of the period being reported on. However the first notifications must be received by the later of the last day of the period covered by the report or 1 September 2017.
Secondly the measure introduces a requirement for the top UK entity required to file under the local filing rules to ask its parent entity for the information it would need to be able to file a full CbC report for the whole group. If the parent entity refuses the UK entity must tell HMRC of the refusal and file a CbC report covering all entities within the sub group of which it is head.