Standardised electronic format for the exchange of Country-by-Country Reports
30 March 2016
The OECD released its standardised electronic format for the exchange of Country-by Country (CbC) Reports between jurisdictions on 22 March 2016. The CbC XML schema and User guide aim to implement Action 13 of the BEPS action plan.
Purpose of the CbC Report
The OECD/G20 BEPS action plan points out 15 key actions to ensure that in an international context, profits are reported where the economic activities are carried out and value is created.
Action 13 focusses on transparency in international tax matters. In view of transparency, it introduces a three-tier approach as to standards with respect to transfer pricing documentation, among which a “Country-by-Country” Report. This Country-by-Country (CbC) Report provides tax administrations a global picture of where MNE profits, tax and economic activities are reported and give them the ability to use this information to assess transfer pricing and other BEPS risks.
The CbC Report is only required for groups with annual consolidated revenue exceeding EUR 750 million in the immediately preceding fiscal year.
The XML schema - a CbC reporting template
The XML schema is a template which allows holding and transmitting information electronically.
It is primarily designed for the automatic exchange of CbC Reports between competent authorities. The information to be included in the CbC Report is to be collected by the country of residence of the reporting entity for the MNE group concerned and subsequently exchanged under the relevant international exchange of information agreement.
The first exchanges will start in 2018, containing information on the year 2016.
Taxpayers can also use the XML schema to transmit information to local tax authorities in countries where the use of the CbC XML schema is mandated domestically.
The User Guide
The User Guide explains each of the elements to be reported in the XML schema. It also provides guidance on how to make corrections (deletions and additions) to data already provided.
The language in which the CbC Report is to be drawn up is determined by the local legislation of the sending jurisdiction. However, the English language is preferred according to the User Guide, if permissible under the local legislation.
Adjustment of IT systems
Not only governments that decide to adopt the XML schema will have to adapt their systems; Also MNEs that are deemed to take part in the CbC reporting will have to adjust their IT systems.