On 8 June 2015 the OECD released a package of measures for implementing the country by country reporting plan proposed as part of the OECD/ G20 action plan on base erosion and profit shifting (BEPS). This package is issued as part of Action 13 of the BEPS action plan and provides a way of quickly implementing the reporting requirements and ensuring that tax administrations can obtain the necessary information.

The country by country (CbC) reporting requirement ensures that multinational enterprises must provide aggregate information on an annual basis covering the jurisdictions in which they operate giving details of income and taxes paid in each jurisdiction. Other details of entities within the group and indicators of economic activity are also required.

Model legislation

The package includes model legislation that will require the parent entity of each multinational group to file the CbC report in the jurisdiction where it is resident. If that jurisdiction does not require filing of a report the package includes back-up filing requirements.

The legislation requires any constituent entity of a multinational group that is resident in a particular country to notify the tax administration whether it is the ultimate parent entity of the group. If the entity is not the ultimate parent it may be required to file a CbC report in some cases where the ultimate parent company is not obliged to file the report in the jurisdiction where it is resident. In some cases a surrogate parent entity of the group may file the CbC report.

If an entity is not the ultimate parent or the surrogate parent it must notify the identity and tax residence of the reporting entity by the due date.

The draft legislation provides that the information in the CbC report must be used for assessing high-level transfer pricing risks and other risks related to base erosion and profit shifting in the jurisdiction. The information may also be used for statistical analysis. The confidentiality of the information must be maintained to the same standards as the confidentiality provisions of the Multilateral Convention on Mutual Administrative Assistance in Tax Matters.

Model competent authority agreements

The package also includes Model Competent Authority Agreements for the exchange of the CbC information between tax authorities. There are three agreements which are based on the multilateral Convention on Administrative Assistance in Tax matters; bilateral double tax agreements; and agreements for the exchange of tax information.

These agreements set out the rules and procedures necessary for competent authorities to arrange for the automatic exchange of the annual CbC report prepared by the reporting entity of the multinational group on an annual basis. The wording of the agreements generally follows the wording of the Multilateral Competent Authority Agreement that is already in place for exchange of information under the common reporting standard.

Country by Country report

The legislation provides for the CbC report to contain aggregate information on revenue, profits, income tax paid and accrued, capital, accumulated earnings, employee numbers and tangible assets (other than cash) in each jurisdiction where the multinational group operates. The report should also contain the identity of each entity within the multinational group with its jurisdiction of tax residence and the jurisdiction where it is organized if different, together with a description of the activities of the entity.

The legislation provides for the report to be filed in the form set out in the standard template in the relevant Annex of the OECD transfer pricing guidelines. The CbC report must be filed no later than twelve months after the last day of the reporting fiscal year of the multinational group. The legislation also deals with the confidentiality of this information.