The OECD has issued updated guidelines on Country-by-Country (CbC) reporting, focusing on the treatment of dividends within the “profit (loss) before income tax” category.
This move aims to enhance transparency and consistency in CbC reporting, providing tax administrations with reliable data for effective risk assessment and analysis.
Effective from 1 January, 2025, these guidelines will provide clarity amidst discrepancies in reporting practices adopted by various jurisdictions and multinational enterprises (MNEs).
The guidance specifically emphasises that payments received from other Constituent Entities, treated as dividends in the payer’s tax jurisdiction, are to be excluded from both Revenue and Profit (Loss) before Income Tax in the recipient’s tax jurisdiction.
This standardisation seeks to streamline reporting practices and enhance the effectiveness of CbC reporting in assessing transfer pricing and other Base Erosion and Profit Shifting (BEPS) risks.
Additionally, the guidelines address how to interpret the expression “payments received from other Constituent Entities that are treated as dividends in the payer’s tax jurisdiction”, ensuring consistency in reporting practices across jurisdictions.
It also extends to cases where accounting rules permit inclusion of another Constituent Entity’s profit in financial reporting, aligning such amounts with dividends for tax reporting purposes.
