On 23 May 2024, the OECD issued guidance on common errors made by multinational enterprise (MNE) groups when preparing their country-by-country (CbC) reports. These reports contain valuable information on the global allocation of income, taxes paid, and the location of economic activity among the tax jurisdictions in which an MNE group operates. This information can be used for a high-level transfer pricing risk assessment, the assessment of other BEPS-related risks, and economic and statistical analysis, if appropriate. However, this information can only be used effectively for these purposes if the data in CbC reports is robust and accurate. Tax administrations have encountered a number of errors in the data contained in CbC reports filed to date, and the new guidance describes the most common of these ...

Check Point Software Technologies was assessed administrative penalties by the tax authorities (FIRS) for failure to file a country-by-country report, and a complaint was filed with the Tax Appeal Tribunal by the company. Decision of the Tribunal The Tax Appeal Tribunal held that the administrative penalties issued by the FIRS in enforcement of the CbCR Regulations were unconstitutional and void because the Board of the Federal Inland Revenue Service, which was legally empowered to make the regulations, did not exist between 2012 and 2020. Since the FIRS Board did not exist during the said period, the exercise of the delegated powers under the provisions of the Nigerian CbCR regulations was not possible – any step, process or action taken in the name of the Board would be null and void. Excerpts “A careful consideration of the provisions of Section 61 as exposed above shows that the National Assembly has delegated its powers specifically to the Board of the Federal Inland Revenue Service to make these rules, guideline and regulations and to no any other person or authority. By necessary implications therefore, it is only the Board of FIRS and legally constituted and properly composed that can exercise the said powers donated by the National Assembly in Section 61. In the course of prosecuting this Appeal, the Appellant had presented concrete evidence before this Honourable Tribunal that during the period under consideration the Boards of all federal parastatals and agencies (including that of the Federal Inland Revenue Service) were dissolved and had not been reconstituted. This fact was not disproved or contradicted by the Respondent before this Honourable Tribunal. The non-existence of a Board during the said period under consideration would mean that a legal and legitimate exercise of the delegated powers under the provisions of Section 61 was not possible meaning that any step, process or action done in the name of the Board will be null and void. … It is therefore the decision of this Honorable Tribunal that the purported Regulation on CBC of 2018 was not made by the Board of the Federal Inland Revenue Service that was legally constituted and properly composed, since it was dissolved and had not been reconstituted by the government at the time when the said regulation was made.” “In line with the above position, it is the decision of this Honourable Tribunal that the Notices of the Administrative Penalties served on the Appellants by the Respondent in the enforcement of the CBC Regulation 2018 are unconstitutional and void. It is therefore, hereby quashed by this Honourable Tribunal and the Respondent is hereby directed to raise fresh Notices of the Penalties based on the relevant provisions of the Federal Inland Revenue Service (Establishment) Act, 2007 and relevant laws.” Click here for translation ...

On 14 October 2022 OECD published updated guidance on CbC reporting. The guidance contains definitions of items in the CbC reporting template – revenue, related parties, tax accrued and paid, fair value accounting, positive and negative figures etc. Issued related to particular reporting entities is also addressed (investment funds, major shareholding, deemed listing provisions and permanent establishment information. Guidance is provided on common issues such as currency fluctuations, definition of consolidated revenue, long and short accounting periods, mergers – demergers and acquisitions, and errors made by MNE groups in preparing CbC reports. And finally the updated guidance addresses issues related to the mechanism for sharing CbCR between tax authorities ...

Anti Tax Avoidance measures are now beeing implemented across the EU with effect as of 1 January 2019. The EU Anti Tax Avoidance Package (ATAP) was issued by the European Commission in 2016 to counter tax avoidance behavior of MNEs in the EU and to align tax payments with value creation. The package includes the Anti-Tax Avoidance Directive, an amending Directive as regards hybrid mismatches with third countries, and four Other measures. The Anti-Tax Avoidance Directive (ATAD), COUNCIL DIRECTIVE (EU) 2016/1164 of 12 July 2016, introduces five anti-abuse measures, against tax avoidance practices that directly affect the functioning of the internal market. 1) Interest Limitation Rule  – Reduce profitshifting via exessive interest payments (Article 4) 2) Exit Taxation – Prevent tax motivated movement of valuable business assets (eg. intangibles) across borders (Article 5) 3) General Anti-Avoidance Rule (GAAR) – Discourage Artificial Arrangements (Article 6) 4) Controlled Foreign Company (CFC) – Reduce profits shifting to low tax jurisdictions (Article 7, 8) 5) Hybrid Mismatch Rule – Reduce Hybrid Mismatch Possibilities (Article 9 + ATAD II) The first measure, interest limitation rule aims to prevent profitshifting activities that take place via exessive interest payments . This rule restricts deductibility of interest expenses and similar payments from the tax base. The second measure, exit taxation, deals with cases where the tax base (eg. valuable intangible assets) is moved across borders. The third measure is the general antiavoidance rule (GAAR) which allows countries to tackle artificial tax arrangements not govened by rational economic reasons. The fourth measure is the controlled foreign company (CFC) rule, which is designed to deter profit-shifting to low-tax countries. The fifth measure, the rule on hybrid mismatches, aims to limit cases of double non-taxation and assymetric deductions resulting from discrepancies between different tax systems. ATAD II, COUNCIL DIRECTIVE (EU) 2017/952) of 29 May 2017, an amending Directive as regards hybrid mismatches with third countries, contains a set of additional rules to neutralize hybrid mismatches where at least one of the parties is a corporate taxpayer in an EU Member State, thus expanding the application to Non-EU countries. The second directive also addresses hybrid permanent establishment (PE) mismatches, hybrid transfers, imported mismatches, reverse hybrid mismatches and dual resident mismatches. (Article 9, 9a and 9b) Other measures included in the Anti Tax Avoidance Package Package are mainly aimed at sharing information and improving knowledge among EU Member States. 1) Country-by-Country Reporting (CbCR) – Improve Transparency (EU Directives on Administrative cooporation in the field of taxation) 2) Recommendation on Tax Treaties – Address Treaty Abuses 3) External Strategy – More Coherent Dealing with Third Countries 4) Study on Aggressive Tax Planning – Improve Knowledge (2015 Report on Structures of Aggressive Tax Planning and Indicators and 2017 Report on Aggressive Tax Planning Indicators)   The Country-by-Country Reporting (CbCR) requirement introduces a reporting requirement on global income allocations of MNEs to increase transparency and provide Member States with information to detect and prevent tax avoidance schemes. The Recommendation on Tax Treaties provides Member States with information on how to design their tax treaties in order to minimise aggressive tax-planning in ways that are in line with EU laws. The External Strategy provides a coherent way for EU Member States to work with third countries, for instance by creating a common EU black list of Low Tax Jurisdictions . The Study on Aggressive Tax Planning investigates corporate tax rules in Member States that are or may be used in aggressive tax-planning strategies. Most of the measures introduced in ATAD I are now implemented and in effect as of 1 January 2019. ATAD II, addressing hybrid mismatches with Non-EU countries, is also being implemented and will be in effect as of 1 January 2020. A Non official version of the 2016 EU Anti Tax Avoidance Directive with the 2017 Amendments ...