CONTINUEThis site uses cookies. By continuing to browse this site you are agreeing to our use of cookies. Find out more.
  1. Front Page
  2. Features
  3. Court-By-Country Reporting - A Progress Report

Court-By-Country Reporting - A Progress Report

By Editorial
April 4, 2017

The call for multinational entities to report, in a standardized format, more information about their business activities and tax position in each country in which they have branches and subsidiaries is a key element of the Organisation for Economic Cooperation and Development's (OECD's) wider base erosion and profit shifting (BEPS) work. This article looks at the background to the development of what become known as country-by-country reporting, and what territories around the world are doing to put these requirements into place at jurisdictional level.


It was noted in the OECD's report entitled "Addressing Base Erosion and Profit Shifting", published in February 2015, that due to imperfect interaction between nations' tax regimes, multinationals have been permitted to legitimately structure their tax affairs using profit-shifting arrangements to pay minimal rates of tax, limiting their exposure to corporate tax rates as high as 30 percent, faced by fiscally immobile businesses in some OECD member states.

In July 2013, the OECD released the BEPS Action Plan, consisting of 15 specific actions designed to give governments the domestic and international mechanisms to effectively close loopholes in the international tax system. Action 13 of the BEPS Action Plan calls on countries to develop rules regarding transfer pricing documentation to enhance transparency for tax administration. The Action Plan states that the rules to be developed will include a requirement that MNEs provide all relevant governments with needed information on their global allocation of the income, economic activity and taxes paid among countries according to a common template.

On January 30, 2014, the OECD published its Discussion Draft on Transfer Pricing Documentation and Country-by-Country Reporting. This formally introduced the concept of a standardized three-tier format on transfer pricing documentation including a master file, a local file and a country-by-country reporting template. The master file would provide an overview of the MNE. The local file would need to include a detailed transfer pricing study, a group organization chart, as well as the taxpayer's financial statements. The CbC report was designed to specify some basic items of financial data in each country where an MNE is organized.

Then, on February 6, 2015, the OECD published guidance in relation to the implementation of the proposed CbC reporting obligations. This document recommended that the master file and local file elements of the new transfer pricing documentation standard be implemented through local country legislation or administrative procedures and that the master file and local file be filed directly with the tax administrations in each relevant jurisdiction as required by those administrations.

The report also recommends that all MNE groups should be required to file the CbC Report each year, except for certain groups, including groups with annual consolidated group revenue in the immediately preceding fiscal year of less than EUR750m (USD815m) or a near equivalent amount in domestic currency.

New CbC Reporting Guidance

Additional guidance on CbC reporting rules and countries' domestic frameworks was released by the OECD on December 5, 2016, in two documents.

The first document comprises details on jurisdictions' legal frameworks for CbC reporting, including the status of the legislation, first reporting periods, availability of surrogate filing, voluntary filing rules, and whether local filing is required.

The second document sets out additional guidance in respect of cases where a notification to the tax administration may be required to identify the reporting entity within a MNE Group (as provided in Article 3 of the Model Legislation in the BEPS Action 13 Report). The guidance confirms that if such notifications are required, jurisdictions have flexibility as to the due date for such notifications. The OECD said this may be particularly relevant during the transition period where jurisdictions are still completing their implementation of CbC reporting, as MNE Groups may not yet have the necessary information to submit their notifications.

The guidance also confirms that jurisdictions may wish to consider other transitional relief for MNE Groups with respect to these notifications, which would also be consistent with the minimum standard.

It is believed that this reporting threshold will exclude approximately 85 to 90 percent of MNE groups from the requirement to file the CbC Report, but that the CbC Report will nevertheless be filed by MNE groups controlling approximately 90 percent of corporate revenues.

Automatic Exchange Of CbC Reports

To facilitate the implementation of the CbC Reporting standard, the BEPS Action 13 report includes a CbC Reporting Implementation Package which consists of model legislation which could be used by countries to require the ultimate parent entity of an MNE group to file the CbC Report in its jurisdiction of residence including backup filing requirements. It also mentions three model Competent Authority Agreements that could be used to facilitate implementation of the exchange of CbC Reports, respectively based on the following mechanisms:

  • The Multilateral Convention on Administrative Assistance in Tax Matters;
  • Bilateral tax conventions; and
  • Tax Information Exchange Agreements.

The Convention on Mutual Administrative Assistance in Tax Matters (the "Convention"), by virtue of its Article 6, requires the Competent Authorities of the Parties to the Convention to mutually agree on the scope of the automatic exchange of information and the procedure to be complied with. Against that background, 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 on Automatic Exchange of Financial Account Information (the "CRS MCAA") -  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 and one for exchanges under Tax Information Exchange Agreements.

The purpose of the CbC MCAA is to set forth rules and procedures as may be necessary for Competent Authorities of jurisdictions implementing BEPS Action 13 to automatically exchange CbC Reports prepared by the Reporting Entity of an MNE Group and filed on an annual basis with the tax authorities of the jurisdiction of tax residence of that entity with the tax authorities of all jurisdictions in which the MNE Group operates.

In March 2016, the OECD released its standardized electronic format for the exchange of CbC Reports between jurisdictions – the CbC XML Schema – as well as the related User Guide.

As at January 26, 2017, a total of 57 countries had signed the MCAA for the automatic exchange of CbC reports.

Jurisdictional Developments

The remainder of this article recounts how CbC reporting requirements are being implemented into national law in various key jurisdictions.

United States

Final regulations for the CbC reporting requirement were published in June 2016, and the US Internal Revenue Service (IRS) issued an early release of draft instructions for Form 8975, Country-by-Country (CbC) Report, in February 2017. The form provides for annual reporting by the US ultimate parent of a multinational enterprise group with revenue of USD850m or more in the preceding accounting year.

The filer must list the US MNE group's business entities, indicating each entity's tax jurisdiction (if any), country of organization and main business activity, and provide financial and employee information for each tax jurisdiction in which the US MNE does business. The financial information includes revenues, profits, income taxes paid and accrued, stated capital, accumulated earnings, and tangible assets other than cash.

Form 8975 and its Schedules A (Form 8975) must be filed with the IRS with the income tax return of the ultimate parent of a US MNE group for the tax year in or within which the reporting period covered by the Form 8975 ends. The first required reporting period for an ultimate parent is the 12-month reporting period that begins on or after the first day of a tax year of the ultimate parent that begins on or after June 30, 2016.

However, the IRS has recognized that a Form 8975 can also be filed for earlier periods if, in accordance with OECD recommendations, local CbC reporting from foreign subsidiaries of US MNE groups is required by other jurisdictions for periods that begin on or after January 1, 2016.

Beginning on September 1, 2017, Form 8975 may therefore be filed for an early reporting period at the same time as the income tax return for the taxable year of the US MNE group's ultimate parent within which the early reporting period ends.

European Union

On May 26, 2016, the Council of the European Union approved a Directive on the CbC reporting of tax information by multinational corporations and automatic exchange of that information between EU tax authorities, which member states would be required to adopt. The Directive is the first element of the anti-tax avoidance package released by the European Commission in January 2016. The directive transposes the OECD recommendation on CbC reporting under base erosion and profit shifting Action 13 into a legally binding EU instrument.

The Directive requires a multinational corporation with total consolidated group revenue of at least EUR750m to file a CbC report to the tax authorities of the member state where it is tax resident. If the parent company is not EU tax resident and does not file a report, it must do so through its EU subsidiaries. Such "secondary reporting" is optional for the 2016 fiscal year, but mandatory as from the 2017 fiscal year.

Information to be reported, on a CbC basis, includes revenues, profits, taxes paid, capital, earnings, tangible assets, and the number of employees. The Directive requires EU tax authorities to exchange these details automatically to assess tax avoidance risks related to transfer pricing. The directive sets deadlines of 12 months after the fiscal year for filing, and a further three months for automatic exchange. It also requires member states to lay down rules on penalties for infringements.

United Kingdom

The UK was one of the first countries to formally commit to implementing the CbC reporting template when it was published by the OECD in September 2014. The Government subsequently introduced legislation in Finance Act 2015, giving the Treasury the power to make suitable regulations.

Final regulations to implement a new CbC reporting obligation for multinational enterprises in the UK were made on February 26, 2016, and laid before the House of Commons. They entered into force on March 18, 2016.

The regulations set out requirements for ultimate parent entities in the United Kingdom and entities of multinational groups with a connection to the United Kingdom to file country-by-country reports or United Kingdom country-by-country reports with HM Revenue and Customs in specified circumstances. It also provides that other entities of multinational groups may file country-by-country reports where specified conditions are met.

The CbC report is required if the MNE group has a total consolidated group revenue of EUR750m or more for an accounting period. The obligation to file a report will apply to accounting periods commencing on or after January 1, 2016. A report must be filed no later than 12 months after the end of the accounting period to which it relates. Penalties apply if a MNE fails to provide a required CbC report on time without a reasonable excuse, or if it knowingly supplies incorrect information. Moreover, the regulations include an anti-avoidance rule to prevent MNEs from circumventing the requirements.


The Act Concerning the Implementation of Changes to the EU Administrative Cooperation Directive and of Additional Measures against Base Erosion and Profit Shifting was published by the Finance Ministry on June 1, 2016, and approved by the Cabinet on July 13. The legislation will formally introduce a transfer pricing CbC reporting regime in Germany as per the recommendations of the OECD in its final report on Action 13 of the BEPS project.

The CbC reporting requirements will apply to ultimate parent entities with annual revenues of at least EUR750m, and must be filed for tax years ending after December 31, 2015, except for entities reporting under the "secondary mechanism," which applies for tax years ending after December 31, 2016. Under the secondary mechanism, when the ultimate parent entity is located in a jurisdiction which does not require CbC reporting, another member of the group in a jurisdiction with CbC reporting rules can be designated to act as the parent company in this capacity.

The bill also transposes into German law the mechanism to allow Germany to exchange CbC reports with foreign tax authorities under the Multilateral Competent Authority Agreement for the automatic exchange of CbC reports, which Germany signed on January 27, 2016.


A CbC reporting framework was introduced in the Netherlands by Regulation No. DB2015/462M, which was published by the Directorate General for Taxation Directorate Direct Taxes on December 30, 2015. The Regulation includes guidance on the required form and content of the CbC report, the master file, and the local file. Information on the requirements regarding the master file is available in English.

The guidance notes that a CbC report must provide an overview of allocation of income, taxes, and business activities by tax jurisdiction; a list of all the constituent entities of the group company included in each aggregation per tax jurisdiction; and any other necessary additional information or explanation.

Under the Dutch CbC rules, Dutch tax resident groups must file a CbC report if the group's net turnover is EUR750m or more. The "master" file should contain information on the group's organizational structure and a description of its business activities; and information on the group's intangibles, inter-company financial activities, and financial and tax positions.

According to the guidance, in the "local" file, entities must include, among other things, a detailed description of the business and business strategy pursued by the local entity, including an indication of whether the local entity has been involved in or affected by business restructurings or intangibles transfers in the present or past year and an explanation of those transactions. The "local" file must also specify the controlled transactions in which the entity is involved and include the local entity's financial accounts for the fiscal year concerned.

However, under a Decree issued in December 2016, the Dutch Government is allowing additional time, until September 1, 2017, for the reporting identity to inform it is either the "ultimate parent entity" or a "surrogate parent entity." Otherwise, the group should identify who is the reporting entity and where it is tax resident. It should also disclose its tax identification number.

The extension is not applicable to MNEs whose fiscal year ends on or after August 31, 2017. These companies are obliged to notify the tax authority of who the reporting entity will be by the end of their fiscal year ending after August 31, 2016.


A law passed in December 2016 requires Luxembourg ultimate parent entities with annual consolidated group revenues of over EUR750m to file CbC reports annually, documenting their revenue, profit, taxes paid and accrued, number of employees, capital, retained earnings, and tangible assets for each tax jurisdiction in which they do business. The law includes provisions to allow a surrogate parent entity to file a CbC report instead of the ultimate parent entity. An MNE must forewarn the tax authority which entity will submit the report.

A CbC report in respect of a reporting fiscal year of an MNE Group would need to be filed within 12 months from the last day of the fiscal year. A penalty of EUR250,000 would apply in certain cases, including where a group fails to provide a required CbC report on time or if it supplies incorrect information or provides information late to the tax authorities.

The legislation also transposes into law the mechanism to allow Luxembourg to exchange CbC reports with foreign tax authorities under the MCAA for the automatic exchange of CbC reports, which Luxembourg signed on January 27, 2016.


On November 7, 2016, Brazil's Finance Ministry released for public comments a draft Normative Instruction to formally introduce a new CbC reporting requirement for large corporations. The draft Instruction, released in Portuguese, would introduce reporting requirements on Brazilian ultimate parent entities with annual consolidated group revenues of over BRL2.260 trillion (USD723m) for Brazilian tax residents, or otherwise EUR750m or the local equivalent. They would be required to file CbC reports annually with the tax authority, documenting their revenue, profit, taxes paid, and accrued, number of employees, capital, retained earnings, and tangible assets for each tax jurisdiction in which they do business.

The new CbC reporting requirement will apply to financial periods beginning from 2016. Penalties would apply if a MNE fails to provide a required CbC report on time.


The Inland Revenue Authority of Singapore (IRAS) published detailed guidance on the implementation of a new CbC reporting requirement in the territory on October 10, 2016. The guidance sets out which entities are obliged to report and how to complete and submit a CbC report to IRAS.

For financial years beginning on or after January 1, 2017, CbC reporting is required from a Singaporean group if its consolidated group revenue exceeds SGD1.125bn (USD805m) and it has subsidiaries or operations in at least one other jurisdiction.

If a Singaporean group is obliged to file a CbC report, the ultimate parent entity must submit a CbC report within 12 months from the end of that financial year. The CbC report must be filed electronically in the prescribed format and contain aggregate tax jurisdiction-wide information relating to the global allocation of the income, taxes paid, and certain indicators of the location of economic activity among tax jurisdictions in which the reporting MNE group operates. It must also include a list of all the entities (including permanent establishments) for which financial information is reported, including the tax jurisdiction of incorporation, where different from the tax jurisdiction of residence, and the nature of the main business activities carried out.

The first CbC report required to be submitted to IRAS is due by December 31, 2018 (for a financial year ending on December 31, 2017). Penalties apply if a MNE fails to provide a required CbC report on time.

Hong Kong

In December 2016, Hong Kong's Inland Revenue Department (IRD) published an explanatory memorandum on the CbC reporting obligation for multinational enterprises with an ultimate parent entity that is tax resident in the city. This followed the launch of a consultation on the implementation of BEPS measures on October 26, 2016, which closed at the end of the year.

Subject to necessary legislative amendments in Hong Kong, it is expected that CbC reporting requirements (which are expected to capture about 150 Hong Kong MNE Groups over the OECD's minimum EUR750m, or HKD6.8bn (USD875m), consolidated group revenue threshold) will be in place for accounting periods commencing on or after January 1, 2018. CbC reports are required to be filed within 12 months of the end of the relevant accounting period.

However, the IRD has noted that a transitional arrangement is required as some other tax jurisdictions have introduced CbC reporting for accounting periods commencing on or after January 1, 2016. To facilitate the fulfillment by Hong Kong MNE groups of their CbC reporting obligations in those jurisdictions, these groups will be allowed to file reports to the IRD for accounting periods commencing between January 1, 2016, and December 31, 2017, to be exchanged with other tax jurisdictions.

It was pointed out that such prior filing will be entirely voluntary, but may relieve a group's constituent entities from a local filing obligation.

The transitional arrangement will only be possible if the required legal framework has been put in place in Hong Kong by December 31, 2017; competent authority agreements have come into effect between Hong Kong and the tax jurisdictions concerned by December 31, 2017; and the IRD has been notified that the CbC reports will be filed by the deadline which is to be provided under the legal framework.


Whilst the BEPS project was intended to fix what were perceived to be major shortcomings in the international tax framework, it is undeniable that multinational companies are now operating in a hugely challenging environment from a tax compliance perspective in numerous ways.

Tax laws and regulations are changing on a regular basis across multiple jurisdictions, and this applies across the whole spectrum of the BEPS project, not merely in the area of transfer pricing documentation, which is just one element of the OECD's recommendations, albeit a highly significant one.

Not only this, multinational companies have had to direct more resources towards compliance, and ensuring that they have the requisite systems in place to gather, collate and present the information required under national CbC rules, and ensure that this data is filed on a timely basis in the right jurisdiction.

And while the BEPS project was intended to iron out the perceived weaknesses on the international corporate tax framework and make the tax landscape more predicable for companies operating in multiple jurisdictions, the experience on the ground suggests that in many ways, the world is becoming a riskier, more uncertain place with regards to taxation, as jurisdictions respond to the BEPS recommendations inconsistently, and as tax authorities ramp up their enforcement activities. Furthermore, companies subject to CbC reporting rules worry about the security of sensitive commercial information passed between national tax authorities, and the consequences if such data falls into the wrong hands.

These concerns have been borne out in numerous surveys of tax professionals and senior management over the last couple of years. For example, one recent survey undertaken by Ernst and Young, the results of which were published in early 2017, found that as many as 79 percent of tax professionals believe dispute resolution is becoming more challenging as countries move to implement the BEPS recommendations.

According to the firm, the rise in controversy is attributable to increasingly well-resourced tax authorities; additional information flowing from documentation requirements under BEPS; and a surge in information sharing protocols at the country level. An anticipated rise in controversy is identified in three key areas throughout the survey:

  • 49 percent point to changes in the treatment of intangible property as a key source of controversy, up from 32 percent in 2013;
  • 44 percent cite permanent establishment rules as a significant controversy driver, rising from 27 percent in 2013; and
  • 48 percent anticipate controversy as a result of intra-group financing, compared with 39 percent in 2013.

The survey of 623 tax and finance executives across 36 countries and 17 industries also highlights regional variations, with Germany and the US topping the list of nations reporting double taxation as a key source of controversy (both 27 percent), and German operations reporting the highest frequency of transfer pricing audits (29 percent).

Peter Griffin, EY Global Transfer Pricing Leader, said: "Thanks to BEPS and other trends leading to greater transparency, tax authorities now have access to more information than ever before. Authorities not only have greater incentive to move quickly, but also more tools to do so."

With regards to CbC reporting, multinational companies have little choice but to ensure that they have the resources in place to meet new transfer pricing documentation requirements that are being put in place around the world, and hope that the information they supply to tax authorities remains secure. Otherwise they risk being hit with financial penalties, drawn into long and expensive tax disputes, and suffering reputational damage.


Tags: tax | BEPS | business | Tax | transfer pricing | accounting | Hong Kong | regulation | law | legislation | Germany | United Kingdom | Brazil | Luxembourg | Singapore | Finance | Europe | employees | tax authority | Netherlands | penalties



Back to Features

Tax-News Reviews

Cyprus Review

A review and forecast of Cyprus's international business, legal and investment climate.

Visit Cyprus Review »

Malta Review

A review and forecast of Malta's international business, legal and investment climate.

Visit Malta Review »

Jersey Review

A review and forecast of Jersey's international business, legal and investment climate.

Visit Jersey Review »

Budget Review

A review of the latest budget news and government financial statements from around the world.

Visit Budget Review »

Stay Updated

Please enter your email address to join the mailing list. View previous newsletters.

By subscribing to our newsletter service, you agree to our Terms and Conditions and Privacy Policy.

To manage your mailing list preferences, please click here »