Country by Country Reporting

Country by Country Reporting

An overview and comparison of various country by country reporting frameworks including key requirements, current status and challenges to consider.

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Country by country reporting

The Organisation for Economic Co-Operation and Development (OECD)’s proposal for introducing a mandatory Country by Country Report (CbC Report) to be submitted to tax authorities is now a reality.  On 5 October 2015, the OECD published final guidance on the implementation of their proposals under Action 13 of the Base Erosion and Profit Shifting (BEPS) project.  On the same day the UK Government issued draft regulations to implement CbC in the UK.  Following a period of consultation revised UK regulations were issued on 26 February 2016 on Taxes (Base Erosion and Profit Shifting) (Country-by-Country Reporting) Regulations 2016 with some significant changes from the original draft.

See our flyer for how we can help you prepare or get in touch with Julie HughffJudith Gibbs or Andy Baillie.


The final OECD report recommends that CbC reporting commence for accounting periods starting on or after 1 January 2016.  There will be an exemption for multinationals with consolidated group revenue of less than €750m (or equivalent in local currency) in the prior financial year.  Filing to the parent country tax authority will be due within 12 months of the group’s financial year end.The members of the OECD and G20 have committed to bring the rules into local legislation and to develop a network of competent authority agreements to facilitate automatic sharing of the CbC Reports amongst relevant tax authorities.  Each week we are seeing countries introduce local legislation and on 27 January 2016, 31 countries signed a Multilateral Competent Authority Agreement to share CbC reports with others expected to join them over the coming months.  

UK Legislation

For accounting periods starting on or after 1 January 2016 multi nationals with a UK tax resident ultimate parent with consolidated group revenues above the sterling equivalent of €750m in the previous period (converted at the average exchange rate for that period) will be required to submit an annual CbC report for the global group to HMRC within 12 months of the year end.  In a change from the original draft, groups with a foreign parent in a country which does not introduce CbC reporting or does not have an effective exchange mechanism with the UK, will have a requirement to file a “UK CbC report” with HMRC for the UK sub-group unless certain exceptions apply.   Broadly the exceptions are where a group company has filed a global CbC report either in a territory with an effective exchange agreement with HMRC or in the UK under the voluntary surrogate mechanism. There are notification requirements which need to be complied with before the filing deadline.  

How should companies be preparing?

A recurring question is ‘what should we be doing to prepare’?  In our experience companies should now be determining whether they are in scope of the UK rules and / or other countries rules, determining their strategy for data collection and reporting, doing dry runs and risk assessing the data.  Initial steps to take include:

  • Determining whether you are in scope – the definitions of multinational group, reporting entity and revenue can be complex particularly for some, such as privately held groups and funds.  Assessing if the group is in scope of the UK rules and for non UK headquartered groups assessing which other countries rules may apply and then determining which parts of the group need to be included in the template is the first step;
  • Interpreting the definitions – the OECD guidance is deliberately high level though there is an expectation of consistency in application across the data points, across countries and over time.  It is worth investing time up front to determine how to interpret the guidance for your group, agree on the assumptions you are going to make and documenting these to ensure consistent application and retain support for the final filing;
  • Designing the dry run process – there is optionality in the guidance about the sources of data that can be used for CbC though again consistency is expected.  Assessing the data requirements and understanding the options for your group will be the starting point in designing the dry run process although experience shows this may be an iterative process as the dry run throws up challenges;
  • Assessing options for data extraction, collation and reporting – considering the most efficient way to extract and aggregate the data including assessing bolt on technology tools that can assist with data collection, aggregation and analysis to assessing options for enhancing ERP systems;
  • Undertaking a dry run – testing your assumptions and the effectiveness and robustness of the data gathering process by undertaking a dry run on current year or prior year data; 
  • Risk assessing the data and refining the process –assessing the dry run data for accuracy to allow for refinement of definitions or the data gathering process.  Undertaking a transfer pricing risk assessment of the data to assess against your transfer pricing policy and prepare for questions that may come from the tax authorities;
  • Deciding on the narrative and approach to sharing the template – judgement will be needed in deciding what to include on the final page of the template and ensuring this is consistent with the Master and Local file.  Whilst the template will be shared automatically with tax authorities entitled to receive it you will want to consider the governance around sharing the template internally and responding to tax authorities queries.  

Other CbC reporting requirements

The OECD CbC Report is not the only country by country reporting requirement.  There are a number of mandatory public reporting regimes for certain sectors and discussions continue in various forums, including at the EU Commission, about introducing mandatory public country by country reporting for large multinationals in all sectors. Our overview and comparison paper provides a summary of the reporting and data requirements for the various regimes and the EU Commission proposals.  

The UK have implemented the Capital Requirements Directive IV (“CRD IV”) which affects certain regulated financial institutions and the Report of Payments to Governments regulations to implement Chapter 10 of the EU Accounting Directive which impact on extractives have already been implemented so companies in these sectors will need to comply with these regulations plus the OECD CbC Reporting requirements, so will need to assess how to gather data efficiently to meet all relevant regulations. There are some differences in the definitions and requirements and companies will want to consider how to articulate the reason for any differences between these reports and the CbC Report as they will all be available to tax authorities.

This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.

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