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OECD Best Practices: Country-by-Country Reporting

OECD Best Practices: Country-by-Country Reporting

The OECD released new handbooks describing best practices for country-by-country reporting.

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The Country-by-Country Reporting: Handbook on Effective Implementation and The Country-by-Country Reporting: Handbook on Effective Tax Risk Assessment are intended to provide support to countries that are introducing country-by-country reporting, as well as to offer guidance for using the information they receive. The OECD notes that it intends to periodically update these books based on the experiences of countries that have adopted this reporting.

Background
Operational and financial country-by-country reporting is part of a new transfer pricing documentation standard. This standard was created under BEPS Action 13. Country-by-country reporting refers to a disclosure form that reports certain financial metrics by tax jurisdiction in which a multinational enterprise group operates. It includes revenue, income, taxes and indicators of economic activity (i.e. employees, stated capital, retained earnings, tangible assets). The OECD recommends that the country-by-country report be prepared by multinational enterprise groups with annual revenue for the preceding year equal to or exceeding €750 million for taxation years beginning on or after January 1, 2016, with a filing due date 12 months after the end of the taxation year. The country-by-country information will be exchanged between treaty partners where the multinational enterprise group has operations (as reported on its country-by-country filing) that have implemented the country-by-country reporting standards.

Canada has accepted the OECD's country-by-country reporting standards and these requirements are set out in section 233.8 of the Act.

Handbooks released
According to the OECD, The Country-by-Country Reporting: Handbook on Effective Implementation is a practical guide to assist countries in implementing country-by-country reporting, taking into account:

  • Key factors that countries should consider in introducing a domestic legal framework for the filing and use of country-by-country reports
  • Issues concerning the implementation and operation of an international framework for the exchange of country-by-country reports
  • Operational aspects of country-by-country reporting, including mechanisms to identify entities required to file country-by-country reports in a country, governmental handling of country-by-country reports and the importance of effective sanctions for non-compliance
  • Practical issues including the importance of providing guidance to taxpayers and tax authority staff, engaging with stakeholders and providing training for tax staff who will deal with country-by-country reports.

The Country-by-Country Reporting: Handbook on Effective Tax Risk Assessment supports countries in the effective use of country-by-country reports by incorporating them into a tax authority's risk assessment process, including:

  • A description of the role of tax risk assessment in tax administration, the core characteristics of an effective risk assessment system, and examples of the approaches used in different countries
  • An outline of the information contained in country-by-country reports, and the potential advantages country-by-country reports have over data from other sources
  • Consideration of the ways in which country-by-country reports can be incorporated into a tax authority's risk assessment framework and a description of some of the main potential tax risk indicators that may be identified using country-by-country reports
  • A description of some of the challenges that may be faced by a tax authority in using country-by-country reports for tax risk assessment and how some of these may be dealt with
  • An outline of some of the other sources of data that may be used by a tax authority alongside country-by-country reports
  • An overview of how the results of a tax risk assessment using country-by-country reports may be used and the next steps that should be taken.

 

For more information, contact your KPMG adviser.

Information is current to October 24, 2017. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500

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