The Organization for Economic Cooperation and Development (OECD) released new transfer pricing and country-by-country reporting (CbCR) guidelines last year. The guidelines require certain multinational enterprises (MNEs) to provide additional information to international tax authorities about their global business operations, economic activities, and transfer pricing policies. Local tax authorities will use the information to track MNEs’ transfer pricing positions.
To date, at least 44 countries have enacted or indicated their intention to enact the CbCR guidelines into their local legislation, including the United States, Canada, Japan, and the U.K. The list of participating countries is expected to grow.
According to the OECD/G20’s “Action 13: Guidance on the Implementation of Transfer Pricing Documentation and Country-by-Country Reporting,” the new CbCR requirements will apply to MNEs with consolidated group revenue of more than €750 million or “near equivalent in domestic currency.” CbCRs must be filed annually in the tax jurisdiction where the parent company is headquartered.
Depending on the adoption date for the concerned country, the first CbCR could be filed as early as December 31, 2017 (that is, for December 31 fiscal-year-end companies operating in countries with CbCR reporting requirements effective from January 1, 2016). The CbCRs will be shared between tax jurisdictions through automatic exchange of information mechanisms in place between countries.
It’s important to note the OECD’s CbCR guidelines are recommendations only, and the OECD acknowledges “that some jurisdictions may need time to follow their particular domestic legislative processes in order to make the necessary adjustments into law.” For these reasons, there are and will likely be potential differences in reporting requirements between adopting countries.
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