Following the first exchanges of country-by-country (CbC) reports, work is underway to support the effective use of CbC reports by tax administrations in assessing transfer pricing and other BEPS-related risks, the OECD has said, in releasing a new progress update.
The OECD has released the outcomes of the second phase of peer reviews of the BEPS Action 13 Country-by-Country (CbC) reporting initiative.
CbC reporting, one of the four minimum standards of the BEPS Project, requires tax administrations to collect and share detailed information on all large MNEs doing business in their country. Information collected includes the amount of revenue reported, profit before income tax, and income tax paid and accrued, as well as the stated capital, accumulated earnings, number of employees and tangible assets, broken down by jurisdiction.
CbC reporting provides an unprecedented level of transparency to tax administrations worldwide. As a result, tax administrations, often for the first time, will have received detailed information on all large MNEs doing business in their country.
As CbC Reporting is one of the four minimum standards of the BEPS Project, all members of the Inclusive Framework on BEPS have committed to implement it, and to have their compliance with the standard reviewed and monitored by their peers.
"The peer review outcomes and the launch of the global exchange of CbC reports in June 2018 show that the BEPS measures are being implemented rapidly, consistently, and globally," said Pascal Saint-Amans, Director of the OECD Centre for Tax Policy and Administration.
The newly released second annual peer review considers implementation of the CbC reporting minimum standard by jurisdictions as of April 2019. Highlights include:
- Coverage increased to 116 jurisdictions. The peer review includes a comprehensive examination of 116 Inclusive Framework members. A small number of members were not included in this review either because they recently joined the Inclusive Framework or they faced capacity constraints, but they will be reviewed as soon as possible;
- Practically all large MNEs are now covered. Over 80 jurisdictions have already introduced legislation to impose a filing obligation on MNE groups, covering almost all MNE Groups with consolidated group revenue at or above the threshold of EUR750m (USD828m). Remaining Inclusive Framework members are working towards finalizing their domestic legal frameworks with the support of the OECD;
- Implementation has been largely consistent with BEPS Action 13. Where legislation is in place, the implementation of CbC Reporting has been found largely consistent with the Action 13 minimum standard;
- 62 recommendations made in the first peer review round have been addressed and these recommendations have been removed;
- Over 2,200 exchange relationships are now in place, with the first exchanges of CbC reports having taken place in June 2018.
On further work, the OECD said an automated Tax Risk Evaluation and Assessment Tool (TREAT) is being developed to help tax administrations – in particular those of developing countries – to use CbC reports to identify important indicators of potential tax risk.
In addition, the OECD said work has now started on a review of the CbC reporting minimum standard, which will include a public consultation in early 2020.