OECD releases additional Country-by-Country guidance | KPMG | IE

OECD releases additional Country-by-Country guidance

OECD releases additional Country-by-Country guidance

The Organisation for Economic Cooperation and Development (“OECD”) released on 18 July 2017 additional guidance on Country-by-Country (CbyC) reporting.


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Updated OECD guidance on Country-by-Country reporting

The Organisation for Economic Cooperation and Development (“OECD”) released on 18 July 2017 additional guidance on Country-by-Country (CbyC) reporting.

The additional guidance is likely to be of interest to multinational companies (“MNCs”) that are parented in tax jurisdictions that prepare local tax filings using a consolidated filing approach that eliminates details of transactions within the tax consolidation group. It is also of interest to MNCs seeking to understand how to report CbyC information on entities, such as joint ventures (JVs), owned by more than one unrelated MNC.

The additional guidance is incorporated into previous guidance released in April 2017, and the updated guidance now covers twelve areas where uncertainty and questions of interpretation arise.


This guidance is part of a series of OECD guidance insights released with the intention of providing consistency and certainty of treatment for both tax administrations and MNCs implementing the CbyC reporting measures under Action 13 of the BEPS Plan. The additional guidance addresses two specific issues:

  • Whether data for each jurisdiction is to be reported in Table 1 of the CbyC report on an aggregated basis or a consolidated basis.
  • How to treat an entity owned and/or operated by two or more unrelated MNC groups.

This adds to earlier guidance issued on a number of matters. These include the definition of “revenues”, the application of the CbyC measures to investment funds as well as transitional filing options for subsidiaries in situations where the ultimate parent jurisdiction’s CbyC rules apply for periods commencing later than 1 January 2016.

Approach to reporting country-by-country data

The OECD model CbyC rules and definitions require that MNCs disclose data such as revenues arising to group entities for each jurisdiction. The reported revenues must be split between revenues arising on transactions with related parties and revenues arising on transactions with third parties. The data is to be prepared on an aggregated basis. This approach contrasts with a consolidated approach to reporting of jurisdictional data which would eliminate, for example, revenues arising on sales between related entities in the same jurisdiction.

The aggregated approach means that if there are multiple companies resident in one jurisdiction in a group and each of them transact with each other, the sum of the revenues generated from these intragroup activities must be included in the CbyC reported information for that jurisdiction.

Where an MNC prepares its CbyC report by drawing on accounting or tax data in jurisdictions where it has prepared accounts or tax returns on a consolidated basis, the requirement to report aggregated data can give rise to practical challenges in compiling the data and makes it more difficult to reconcile CbyC reported data to jurisdictional accounting and/or tax return data prepared using a consolidated approach. 

Some flexibility to adopt a consolidated approach to CbyC reporting

The July 2017 OECD guidance affords some flexibility to adopt a consolidated approach in reporting jurisdictional data. This flexibility applies only where the ultimate MNC parent is resident in a jurisdiction which requires tax filings on a consolidated basis. Taking, for example, the United States of America (US), the tax return filed by the parent entity for a tax consolidation reflects data that has eliminated the effect of transactions between members of the US consolidated tax group.

The guidance requires that if a consolidation approach is applied, it must be applied consistently across all jurisdictions (and not just those jurisdictions where a tax consolidation approach to tax filings exists). The adoption of the consolidation approach should also be disclosed in the notes to the CbyC report.

The flexibility afforded by the new guidance would not appear to apply to Irish or UK parented MNCs. This is because neither the Irish nor the UK corporation tax regimes operate on a tax consolidation basis. Irish and UK corporation tax group members file separate tax returns which reflect revenues and transactions with other members of the local tax group.

The OECD release only constitutes guidance. Ultimately, it is for individual jurisdictions to determine, in their own respective legislation and/or guidance, to what extent the aggregation or consolidation approach should be followed. The current IRS instructions for completion of CbyC reports by US parented MNCs requires an aggregation approach to be adopted as set out in the US CbyC regulations. 

Entities owned by two or more unrelated multinational groups (e.g. JV’s)

Additional guidance is also given in relation to the treatment of an entity which is owned and/or operated by more than one unrelated MNC group e.g. a JV entity. The guidance suggests that an entity should be included as a constituent entity and included in the MNC CbyC report where the entity is included in the MNC accounting consolidation. If it is not included in the accounting consolidation, it is not to be treated as a constituent entity of that MNC.

In applying the €750 million turnover threshold for CbyC reporting, MNCs should take into account the revenues of entities included in the accounting consolidation. The guidance provides that the MNC can take into account only its pro rata share of revenues from the entity where a pro rata consolidation approach has been adopted for accounting purposes.

Where a pro rata accounting consolidation approach has been adopted, it is also possible to reflect and prepare the jurisdictional reporting figures in the CbyC report based on the pro rata consolidation approach.

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