The final wave of Base Erosion and Profit Shifting (BEPS) Country-by-Country (CbC) reporting for many Australian taxpayers with December year-ends is imminent. The extended due date the Australian Taxation Office (ATO) gifted as an early Christmas present is 15 February 2018.
As a recap, Australian taxpayers have a primary obligation to lodge the CbC report, Master File and Australian Local File (ALF) with the ATO. Failure to lodge on time has the potential for extremely onerous penalties!
As we get close to filing, we’ve listed below some areas to be mindful of:
- Where you are relying on your parent (or surrogate) to lodge the CbC report in its home jurisdiction to satisfy your CbC report obligation, it is important to ensure that the bilateral exchange relationship between that country and Australia has been activated for the taxable period which the CbC report will cover. Of particular interest, China has not yet activated with Australia and therefore the CbC report will need to be lodged directly with the ATO.
- The ATO has just released initial guidance for the short form (qualitative) part of the ALF, expanding the Organisation for Economic Co-operation and Development (OECD) Local File guidance in a number of areas. For example, in respect of organisational structure, requiring both job title and responsibilities of senior Australian management and the overseas individuals to whom they report, and both formal and effective overseas reporting lines.
- If you encounter a lodgement “error”, don’t panic - the ATO has been upgrading its systems and infrastructure to cater for the ALF lodgements. It is advisable to lodge early so that if any technical difficulties are experienced, these can be rectified.
- For Multinational Enterprises (MNEs) with multiple divisions, the Master File obligation will only be satisfied if the full Master File is lodged rather than only the division to which the Australian taxpayer belongs.
- Following extensive consultation on the requirement for realised foreign exchange gains and losses by counterparty and transaction type which had proved very challenging, the ATO provided a concession for the first year that zeros could be reported, with a further concession being proposed in year 2 of CbC reporting for more “day to day” business type transactions (e.g. stock and services), subject to certain criteria.
It is welcome that the ATO is listening to and responding to feedback, although the reporting regime is still proving time-consuming and challenging to complete.
The next challenge is on the ATO as they review and risk assess the first round of completed CbC reporting documents.