OECD: Initial impressions of BEPS country-by-country reporting implementation package

OECD: Initial impressions of BEPS CbyC reporting

The Organisation for Economic Co-operation and Development (OECD) earlier this week published a country-by-country reporting implementation package, as an additional deliverable prepared under Action 13 of the base erosion and profiting shifting (BEPS) project.


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In September 2014, the OECD released guidance on transfer pricing documentation and country-by-country (CbyC) reporting under BEPS Action 13.

Action 13 calls for a review of the existing transfer pricing documentation rules and the development of a template for country-by-country reporting (CbyC) of income, taxes, and economic activity for tax administrations.The September Action 13 guidance called for a three-tiered approach to transfer pricing documentation (i.e., Master file, Local file, and CbyC Report) but deferred guidance, until February 2015, on the implementation of the September Action 13 guidance.

The February 2015 Action 13 implementation guidance [PDF 534 KB] covered:

  • The timing of preparation and filing of the CbyC report
  • Which multinational enterprises (MNEs) would 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

This week’s implementation package is a follow-up on the February Action 13 implementation guidance and is aimed at providing jurisdictions model legislation to require the CbyC report in their jurisdiction and to also provide the framework to exchange the CbyC report between Competent Authorities.

Overview of CbyC reporting implementation package

The implementation package specifically provides:

  • Model legislation that could be used by jurisdictions to require the ultimate parent entity of an MNE group to file the CbyC report in its jurisdiction of residence including backup filing requirements
  • Three model Competent Authority agreements that could be used to facilitate the implementation of the exchange of CbyC reports based on the (1) Multilateral Convention on Administrative Assistance in Tax Matters, (2) bilateral tax conventions; and (3) Tax Information Exchange Agreements (TIEAs).

The following summarizes the key points. 

Model legislation related to country-by-country reporting

The “model legislation” provides jurisdictions with sample language to adopt CbyC reporting in their own jurisdiction. Specifically, it lays out sample language or a placeholder for the jurisdiction to insert language for the filing obligation, notification; contents of the CbyC report, timing, use and confidentiality of the CbyC report’ penalties, and effective date.

The model legislation template is consistent with the September 2014 Action 13 guidance and the February 2015 Action 13 implementation guidance. However, it is intended that that jurisdiction fills in certain information for the local adoption of the CbyC report. For example, the model legislation has a placeholder section for penalties but “…assumes that jurisdictions would wish to extend their existing transfer pricing documentation penalty regime to the CbyC Report.”

Another noteworthy requirement in the model legislation is for a taxpayer to provide a notification to the country’s tax administration as to which entity within the MNE group is filing the CbyC report. This can come either in the form of notifying the country’s tax administration that the ultimate parent entity or surrogate parent entity is in its jurisdiction or if the ultimate parent entity or surrogate parent entity is not, the identity and tax residency of the reporting entity, as defined in the model legislation.

Multilateral Competent Authority agreement on the exchange of country-by-country reports and subsequent annexes

The OECD has developed the multilateral Competent Authority agreement on the exchange of CbyC report (CbyC MCAA). The CbyC MCAA is based on the multilateral Competent Authority agreement but with the context of the CbyC report.

The OECD has also included two additional model competent authority agreements for the exchange of CbyC reports as annexes that are described as the “Competent Authority agreement on the exchange of CbyC reports on the basis of a double tax convention” (DTC CAA) and the “Competent Authority agreement on the basis of a tax information exchange agreement” (TIEA CAA).

The purpose of the CbyC MCAA is to describe the rules and procedures for Competent Authorities of jurisdictions implementing BEPS Action 13 to automatically exchange CbyC reports. The OECD notes that for most of the sections, the wording is substantially the same as the text of the multilateral Competent Authority agreement for the purpose of exchanges under the Common Reporting Standard but when appropriate, has been changed to reflect the Action 13 guidance.

In Section 3 of the CbyC MCAA, the DTC CAA, and the TIEA CAA, the OECD describes the proposed timeline for exchange of the CbyC report between Competent Authorities subject to them having local legislation and one of the CbyC Competent Authority agreements in effect.

Specifically in the first year, the CbyC report will be exchanged by Competent Authorities no later than 18 months after the last day of the reporting entity’s fiscal year-end and in Year 2 and beyond no later than 15 months after the last day of the reporting entity’s fiscal year-end. Thus for a reporting entity with a 31 December year-end, the reporting entity must file the CbyC report for the 2016 fiscal year by 31 December 2017, and the Competent Authorities will exchange the 2016 CbyC report no later than June 2018.

The 2017 CbyC report must be exchanged no later than March 2019. 

What’s next?

The OECD has indicated that it will develop an XML schema and a related user guide to for the electronic exchange for the CbyC reports.

KPMG observation

As was expected after the February 2015 BEPS Action 13 implementation guidance, the implementation package provides for a government-to- government exchange of the CbyC report. It does not alter the CbyC report guidance that was provided previously in the September 2014 BEPS Action 13 guidance and in the February 2015 BEPS Action 13 implementation guidance.

The content is for the use of governments to exchange the CbyC report and ultimately, taxpayers will need to wait to see if governments use the model legislation and CbyC Competent Authority agreements when implementing local legislation and exchanging the CbyC reports.

Contact a tax professional with KPMG's Global Transfer Pricing Services.

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