ATO releases Country-by-Country Reporting exemption guidance

ATO releases CbCR exemption guidance

Jane Rolfe and Aaron Yeo outline the ATO's new guidance on applying for Country-by-Country reporting exemptions.

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The Australian Taxation Office (ATO) has published further guidance for taxpayers who are (or will be) subject to the Country-by-Country Reporting (CbCR) regime.

The guidance outlines how taxpayers can apply for a specific exemption from some or all the CbCR obligations and also the general principles the ATO will take into account in making its decision. It covers taxpayers that are Australian subsidiaries of overseas multinational enterprises (MNEs) as well as Australian-based MNEs.

This exemption guidance is part of a larger tranche of guidance that the ATO is releasing to assist taxpayers to comply with the CbCR regime.

Key observations

Our key observations with respect to the guidance are:

  • Content of the exemption request: taxpayers should specify in their request the CbCR obligations that the request is covering (e.g. CbC report, master file and/or local file), the reporting periods for which an exemption is sought (up to 3 years), the entities covered under the exemption, the reasons for seeking the exemption and any documents supporting the request.
  • General considerations that the ATO will take into account: the key factors the ATO will consider in providing an exemption include: whether the taxpayer is subject to a risk review/audit, the scale and nature of the taxpayer’s international related party dealings (IRPDs), and the tax jurisdiction of the counterparty to the IRPDs.
  • Transitional exemption for inbound MNEs: the ATO has reiterated that a 1-year transitional exemption from the CbC report and master file (but not the local file) will be available if the taxpayer’s global parent entity is resident in a jurisdiction that has not implemented CbCR, but this exemption may extend up to 3 years if the jurisdiction has officially announced an intention to implement CbCR (but does not implement in the 3 years).
  • Taxpayers with global parent entities exempted from CbCR in home jurisdiction: the ATO will not exempt taxpayers on this basis alone without understanding the reasons for the exemption being granted to the global parent entity by the respective tax authority.
  • Domestic Australian-based MNEs: the ATO is concerned to ensure that its obligations to other jurisdictions to automatically exchange CbC reports will not be impacted by exemptions granted. Conversely, Australian-based MNEs with no overseas operations that would be disclosed in the CbC report would have strong grounds for an exemption for the CbCR.
  • Obligation to notify of changes: exemptions will be granted on the condition that the taxpayer notifies the ATO of subsequent changes to facts or circumstances that could impact on the exemption.
  • Timing of exemption: the ATO has recommended that an exemption request is made as soon as possible in order for a decision to be made prior to the statutory due date for the reports (being a year after the end of the first reporting period). The ATO aims to respond to requests within 28 days.

Impacted taxpayers should consider their facts and circumstances and determine whether an exemption request would be appropriate, particularly given the potential to reduce compliance costs.

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