OECD releases new CbC reporting guidance | KPMG | UK

OECD releases new CbC reporting guidance

OECD releases new CbC reporting guidance

Two sets of guidance on Country by Country reporting have been published.

1000

Also on KPMG.com

The OECD has released two sets of guidance on Country by Country (CbC) reporting. The guidance is intended to clarify certain aspects of the implementation and operation of CbC reporting for multinational entity (MNE) groups and tax authorities, and comprises updates to the existing guidance, as well as a new set of guidance on the appropriate use of the information contained in CbC reports.

The guidance on CbC reporting document comprises all of the interpretative guidance on CbC reporting released so far by the OECD, and will be updated in the future for any further guidance published. The recent updates include:

Definition of revenues                                                                        

The guidance states that all revenue, gains, income, or other inflows shown in the financial statement prepared in accordance with the applicable accounting rules relating to profit and loss should be reported as Revenues. This includes extraordinary income and gains from investment activities. Comprehensive income/earnings, revaluations, and/or unrealised gains reflected in net assets and the equity section of the balance sheet should not be reported as Revenues. 

The treatment of MNE groups with a short accounting period

As a transitional measure, jurisdictions may allow the reporting entity of an MNE Group with a short accounting period beginning on or after 1 January 2016 and ending before 31 December 2016 to file their CbC report in the same timelines as MNE Groups with a fiscal year ending on 31 December 2016. This will similarly extend the date by which the CbC report is to be exchanged.

The treatment of the amount of income tax accrued and income tax paid

The guidance confirms that tax accrued for the reporting fiscal year should be reported as Income Tax Accrued-Current Year, regardless of whether it has already been paid. Any tax paid in the reporting fiscal year, including tax relating to another fiscal period, should be reported independently as Income Tax Paid (on Cash Basis). Tax refunds should also be reported under the Income Tax Paid (on Cash Basis) heading.

Guidance has also been released on the appropriate use of the information contained in CbC reports, including:

Guidance on the meaning of ‘appropriate use’

Three categories of ‘appropriate use’ are set out in the guidance:

  • High level transfer pricing risk assessment; 
  • Assessment of other BEPS related risks; and
  • Economic and statistical analysis, where appropriate.

The guidance makes it clear that the information in CbC reports should not be used as the sole basis for proposing transfer pricing amendments or income adjustments.

The consequences of non-compliance with the appropriate use condition

Jurisdictions must commit to the appropriate use of CbC reports as a condition of their exchange. Breaches of the appropriate use condition must be reported, with any inappropriate adjustments stopped. Where there has been significant non-compliance, the exchange of CbC reports may be suspended.

Tax administration approaches

This section contains guidance on the steps jurisdictions may take, if necessary, to ensure the appropriate use of CbC reporting information. A checklist is included with six basic questions that a jurisdiction should be able to answer ‘yes’ to ahead of the first exchange of CbC reports.

 

For further information please contact:

Mark Body

Judith Gibbs


 

Connect with us

 

Request for proposal

 

Submit