OECD: Transfer pricing documentation, country-by-country reporting

OECD: Transfer pricing documentation

The Organisation for Economic Co-operation and Development (OECD) on 6 February 2015 published guidance on Action 13 (Guidance on the Implementation of Transfer Pricing Documentation and Country-by-Country Reporting) as an additional deliverable prepared under its Action Plan on base erosion and profiting shifting (BEPS).

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Under BEPS Action 13, the OECD published a discussion draft of revised guidance on transfer pricing documentation and country-by-country reporting in January 2014.

BEPS Action 13 calls for:

  • A review of the existing transfer pricing documentation rules
  • The development of a template for country-by-country (CbyC) reporting of income, taxes, and economic activity for tax administrations

The OECD in September 2014 released guidance on transfer pricing documentation and country-by-country (CbyC) reporting under Action 13. Read TaxNewsFlash-Transfer Pricing

The September 2014 guidance called for a three-tiered approach to transfer pricing documentation (i.e., master file, local file and CbyC), but deferred guidance—until now—on implementation


The OECD's February 2015 implementation guidance [PDF 534 KB] under BEPS Action 13 primarily concerns CbyC reporting, but recommends that the master file and local file be implemented through local country legislation or administrative procedures, and that the master file and local file be filed directly with the tax administrations in each relevant jurisdiction, as required by those administrations.

The implementation guidance specifically addresses the following areas with respect to CbyC reporting:

  • The timing of preparation and filing of the CbyC report
  • Which multinational enterprises (MNEs) are to be required to file a CbyC report
  • The necessary conditions for obtaining and using the CbyC report
  • The framework for government-to-government mechanisms to exchange CbyC reports and implementation package

The following discussion summarizes the key points in the four areas.

1. Timing of preparation and filing of the CbyC report

The OECD recommends that the first CbyC report be filed for the fiscal years beginning on or after 1 January 2016. As reported in the September 2014 guidance, the OECD recommends that MNEs be allowed one year from the fiscal year-end to file the CbyC report.

Thus, MNEs with a 31 December 2016 year-end would be required to file a CbyC report by 31 December 2017.

For MNEs with a fiscal year ending on a date other than 31 December, the first CbyC report would be required to be filed in calendar year 2018—12 months after the end of the MNEs fiscal year, and would report on the MNE group’s first fiscal year beginning after 1 January 2016.

2. Which MNEs to be required to file a CbyC report

MNEs with consolidated group revenue in the preceding fiscal year of €750 million or more would be required to file a CbyC report. MNEs with consolidated group revenue in the preceding fiscal year of less than €750 million would not be required to file a CbyC report.

3. Necessary conditions for obtaining and using the CbyC report

The OECD outlines the following three conditions for countries obtaining and using the CbyC report:

  • Confidentiality - The implementation guidance recommends that countries have in place and enforce legal protections of the confidentiality of the reported information.
  • Consistency - The OECD guidance recommends that countries use their best efforts to adopt requirements that the MNE parent companies in their jurisdiction prepare and file the CbyC report, unless they fall below the revenue threshold (as noted above). The OECD guidance encourages countries to adopt the template provided in Annex III of the September 2014 Action 13 guidance and specifically to not require more or less information than in the template.
  • Appropriate use - The OECD implementation guidance re-emphasizes the appropriate use of the CbyC report for assessing “high-level transfer pricing risk” and not using the CbyC data for proposing formulaic-based adjustments. The OECD specifically recommended that if a country makes a formulaic-based adjustment based on the CbyC data, the country’s competent authority promptly concede the adjustment in competent authority proceedings.

4. Framework for government-to-government mechanisms to exchange CbyC reports and implementation package

The OECD guidance recommends that jurisdictions require the ultimate parent of a MNE resident in their country that meets the revenue threshold (described above under number 2) to file the CbyC report. The country would exchange this information on an automatic basis with jurisdictions in which the MNE operates and that meet the necessary conditions (also described above under number 3).

If a jurisdiction fails to provide information to a jurisdiction that meets the conditions, there will be a secondary mechanism whereby the MNE would file the CbyC report locally or by moving the obligation to the next tier parent country that would automatically exchange it.

What’s next?

As part of implementation, the OECD has agreed to develop the following items or actions by April 2015:

  • Key elements of statutory legislation that countries would be able to adopt for use in their own legal systems
  • Agreements based on existing international agreements for the automatic exchange of the CbyC reports between jurisdictions (both bilateral and multilateral)

The OECD indicated that it will provide some additional language to assist countries with implementation by April 2015.

KPMG observation

The implementation guidance provides some additional clarity regarding the timing and requirements for filing the CbyC report, master file, and local files.

For the CbyC report, the implementation guidance mentions that the €750 million threshold would exclude 85%-90% of MNEs from having to file the required CbyC form, but would capture 90% of corporate revenues. At this time, it appears companies beneath this threshold would not have to file a CbyC form. However, the OECD and G20 will review the implementation of the new standard in 2020, and consider the appropriateness of the revenue threshold, as well as whether additional or other data needs to be reported on the form.

Tax professionals were encouraged to see the OECD recommend that competent authorities concede adjustments based on a formulaic approach using the CbyC data. It will continue to be important that the OECD focus on the need for more effective dispute resolution, especially following the adoption and implementation of the CbyC report.

While local countries are still in the process of making this guidance law, several large jurisdictions have publically said they would do so. Thus, MNEs that meet the revenue threshold need to start planning for CbyC because 2015 may be the last year for which the information will not be reported in the CbyC template.

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