International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Wednesday, June 10, 2015

OECD releases Implementation Package for BEPS country-by-country reporting

OECDPushing forward efforts to boost transparency in international tax matters, the OECD today released a package of measures for the implementation of a new Country-by-Country Reporting plan developed under the OECD/G20 BEPS Project.

The Country-by-Country Reporting Implementation Package will facilitate a consistent and swift implementation of new transfer pricing reporting standards developed under Action 13 of the BEPS Action Plan, ensuring that tax administrations obtain a complete understanding of the way multinational enterprises (MNEs) structure their operations, while also ensuring that the confidentiality of such information is safeguarded.

Action 13 of the BEPS Action Plan recognised that enhancing transparency for tax administrations, by providing them with information to assess high-level transfer pricing and other BEPS-related risks, is crucial for tackling base erosion and profit shifting.

Country-by-country reporting requirements will require MNEs to provide aggregate information annually, in each jurisdiction where they do business, relating to the global allocation of income and taxes paid, together with other indicators of the location of economic activity within the MNE group, as well as information about which entities do business in a particular jurisdiction and the business activities each entity engages in.

The new implementation package consists of model legislation requiring the ultimate parent entity of an MNE group to file the country-by-country report in its jurisdiction of residence, including backup filing requirements when that jurisdiction does not require filing. The package also contains three Model Competent Authority Agreements to facilitate the exchange of country-by-country reports among tax administration. The model agreements are based on the Multilateral Convention on Administrative Assistance in Tax Matters, bilateral tax conventions and Tax Information Exchange Agreements (TIEAs).

Model legislation: The model legislation contained in the Country-by-Country Reporting Implementation Package takes into account neither the constitutional law and legal system, nor the structure and wording of the tax legislation of any particular jurisdiction. Jurisdictions will be able to adapt this model legislation to their own legal systems, where changes to current legislation are required.

Competent Authority Agreements: As the implementation of the automatic exchange of information by means of a Multilateral Competent Authority Agreement in the context of the Common Reporting Standard has proven both time- and resource-efficient, the same approach could be used for the purpose of putting the automatic exchange of information in relation to CbC Reports in place. Therefore, the Multilateral Competent Authority Agreement on the Exchange of CbC Reports (the “CbC MCAA”) has been developed, based on the Convention and inspired by the Multilateral Competent Authority Agreement concluded in the context of the implementation of the Common Reporting Standard. In addition, two further model competent authority agreements have been developed for exchanges of CbC Reports, one for exchanges under Double Tax Conventions (Annex I) and one for exchanges under Tax Information Exchange Agreements (Annex II).

The package was approved by the countries participating in the OECD/G20 BEPS Project at the last meeting of the OECD Committee on Fiscal Affairs, held on 27-28 May. It follows from the publication of the report Guidance on Transfer Pricing Documentation and Country-by-Country Reporting in September 2014 and of the Guidance on the Implementation of Transfer Pricing Documentation and Country-by-Country Reporting Proposals in February 2015.

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