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 ...

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 ...

Annex IV to Chapter V Country-by-Country Reporting Implementation Package Introduction In order to facilitate a consistent and swift implementation of the Country-by-Country Reporting developed under Action 13 of the Base Erosion and Profit Shifting Action Plan (BEPS Action Plan, OECD, 2013), a Country-by-Country Reporting Implementation Package. This implementation package consists of (i) model legislation which could be used by countries to require the ultimate parent entity of an MNE group to file the Country-by-Country Report in its jurisdiction of residence including backup filing requirements and (ii) three model Competent Authority Agreements that are to be used to facilitate implementation of the exchange of Country-by-Country Reports, respectively based on the 1) Convention on Mutual Administrative Assistance in Tax Matters, 2) bilateral tax conventions and 3) Tax Information Exchange Agreements (TIEAs). It is recognised that developing countries may require support for the effective implementation of Country-by-Country Reporting. 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 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. In the context of the Common Reporting Standard, this requirement has been translated into a Multilateral Competent Authority Agreement, which defines the scope, timing, procedures and safeguards according to which the automatic exchange should take place. 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 Country-by-Country Reports in place. Therefore, the Multilateral Competent Authority Agreement on the Exchange of Country-by-Country 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 Country-by-Country Reports, one for exchanges under Double Tax Conventions and one for exchanges under Tax Information Exchange Agreements. In line with paragraph 5 of Chapter V of these Guidelines, one of the three objectives of transfer pricing documentation is to provide tax administrations with the information necessary to conduct an informed transfer pricing risk assessment, while paragraph 10 of Chapter V of these Guidelines states that effective risk identification and assessment constitute an essential early stage in the process of selecting appropriate cases for transfer pricing audit. The Country-by-Country Reports exchanged on the basis of the model competent authority agreements contained in the present Country-by-Country Reporting Implementation Package, represent one of the three tiers of the transfer pricing documentation and will, in accordance with paragraphs 16, 17 and 25 of Chapter V of these Guidelines, provide tax administrations with relevant and reliable information to perform an efficient and robust transfer pricing risk assessment analysis. Against that background, the model competent authority agreements aim to provide the framework to make the information contained in the Country-by-Country Report available to concerned tax authorities, such information being foreseeably relevant for the administration and enforcement of their tax laws through the automatic exchange of information. 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 Country-by-Country 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. For most provisions, the wording is substantially the same as the text of the Multilateral Competent Authority Agreement for the purpose of exchanges under the Common Reporting Standard. Where appropriate, the wording has been complemented or amended to reflect the Guidance on Country-by-Country Reporting set out in Chapter V of these Guidelines. An XML Schema and a related User Guide has also been developed to accommodate the electronic exchange of Country-by-Country Reports. Model legislation related to Country-by-Country Reporting Article 1 Definitions For purposes of this [title of the law] the following terms have the following meanings: The term “Group” means a collection of enterprises related through ownership or control such that it is either required to prepare Consolidated Financial Statements for financial reporting purposes under applicable accounting principles or would be so required if equity interests in any of the enterprises were traded on a public securities exchange. The term “MNE Group” means any Group that (i) includes two or more enterprises the tax residence for which is in different jurisdictions, or includes an enterprise that is resident for tax purposes in one jurisdiction and is subject to tax with respect to the business carried out through a permanent establishment in another jurisdiction, and (ii) is not an Excluded MNE Group. The term “Excluded MNE Group” means, with respect to any Fiscal Year of the Group, a Group having total consolidated group revenue of less than [750 million Euro]/[insert an amount in local currency approximately equivalent to 750 million Euro as of January 2015] during the Fiscal Year immediately preceding the Reporting Fiscal Year as reflected in its Consolidated Financial Statements for such preceding Fiscal Year. The term “Constituent Entity” means (i) any separate business unit of an MNE Group that is included in the Consolidated Financial Statements of the MNE Group for financial reporting purposes, or would be so included if equity interests in such business unit of an MNE Group were traded on a public securities exchange; (ii) any ...

Annex III to Chapter V Transfer Pricing Documentation – Country-by-Country Report A. Model template for the Country-by-Country Report Table 1. Overview of allocation of income, taxes and business activities by tax jurisdiction Table 2. List of all the Constituent Entities of the MNE group included in each aggregation per tax jurisdiction Please specify the nature of the activity of the Constituent Entity in the Additional Information” section. Table 3. Additional Information B. Template for the Country-by-Country Report – General instructions Purpose This Annex III to Chapter V of these Guidelines contains a template for reporting a multinational enterprise’s (MNE) group allocation of income, taxes and business activities on a tax jurisdiction-by-tax jurisdiction basis. These instructions form an integral part of the model template for the Country-by-Country Report. Definitions Reporting MNE A Reporting MNE is the ultimate parent entity of an MNE group. Constituent Entity For purposes of completing Annex III, a Constituent Entity of the MNE group is (i) any separate business unit of an MNE group that is included in the Consolidated Financial Statements of the MNE group for financial reporting purposes, or would be so included if equity interests in such business unit of the MNE group were traded on a public securities exchange; (ii)   any such business unit that is excluded from the MNE group’s Consolidated Financial Statements solely on size or materiality grounds; and (iii)  any permanent establishment of any separate business unit of the MNE group included in (i) or (ii) above provided the business unit prepares a separate financial statement for such permanent establishment for financial reporting, regulatory, tax reporting, or internal management control purposes. Treatment of Branches and Permanent Establishments The permanent establishment data should be reported by reference to the tax jurisdiction in which it is situated and not by reference to the tax jurisdiction of residence of the business unit of which the permanent establishment is a part. Residence tax jurisdiction reporting for the business unit of which the permanent establishment is a part should exclude financial data related to the permanent establishment. Consolidated Financial Statements The Consolidated Financial Statements are the financial statements of an MNE group in which the assets, liabilities, income, expenses and cash flows of the ultimate parent entity and the Constituent Entities are presented as those of a single economic entity. Period covered by the annual template The template should cover the fiscal year of the Reporting MNE. For Constituent Entities, at the discretion of the Reporting MNE, the template should reflect on a consistent basis either (i) information for the fiscal year of the relevant Constituent Entities ending on the same date as the fiscal year of the Reporting MNE, or ending within the 12 month period preceding such date, or (ii) information for all the relevant Constituent Entities reported for the fiscal year of the Reporting MNE. Source of data The Reporting MNE should consistently use the same sources of data from year to year in completing the template. The Reporting MNE may choose to use data from its consolidation reporting packages, from separate entity statutory financial statements, regulatory financial statements, or internal management accounts. It is not necessary to reconcile the revenue, profit and tax reporting in the template to the consolidated financial statements. If statutory financial statements are used as the basis for reporting, all amounts should be translated to the stated functional currency of the Reporting MNE at the average exchange rate for the year stated in the Additional Information section of the template. Adjustments need not be made, however, for differences in accounting principles applied from tax jurisdiction to tax jurisdiction. The Reporting MNE should provide a brief description of the sources of data used in preparing the template in the Additional Information section of the template. If a change is made in the source of data used from year to year, the Reporting MNE should explain the reasons for the change and its consequences in the Additional Information section of the template. C. Template for the Country-by-Country Report – Specific instructions Overview of allocation of income, taxes and business activities by tax jurisdiction (Table 1) Tax Jurisdiction In the first column of the template, the Reporting MNE should list all of the tax jurisdictions in which Constituent Entities of the MNE group are resident for tax purposes. A tax jurisdiction is defined as a State as well as a non-State jurisdiction which has fiscal autonomy. A separate line should be included for all Constituent Entities in the MNE group deemed by the Reporting MNE not to be resident in any tax jurisdiction for tax purposes. Where a Constituent Entity is resident in more than one tax jurisdiction, the applicable tax treaty tie breaker should be applied to determine the tax jurisdiction of residence. Where no applicable tax treaty exists, the Constituent Entity should be reported in the tax jurisdiction of the Constituent Entity’s place of effective management. The place of effective management is the place where key management and commercial decisions that are necessary for the conduct of the entity’s business as a whole are in substance made. All relevant facts and circumstances must be examined to determine the place of effective management. An entity may have more than one place of management, but it can have only one place of effective management at any one time. Revenues In the three columns of the template under the heading Revenues, the Reporting MNE should report the following information: (i) the sum of revenues of all the Constituent Entities of the MNE group in the relevant tax jurisdiction generated from transactions with associated enterprises; (ii) the sum of revenues of all the Constituent Entities of the MNE group in the relevant tax jurisdiction generated from transactions with independent parties; and (iii) the total of (i) and (ii). Revenues should include revenues from sales of inventory and properties, services, royalties, interest, premiums and any other amounts. Revenues should exclude payments received from other Constituent Entities that are treated as dividends in the ...

For purposes of Annex III to Chapter V of these Guidelines, the Country-by-Country Report should include all tax jurisdictions in which the MNE group has an entity resident for tax purposes, regardless of the size of business operations in that tax jurisdiction ...

Annex III to Chapter V of these Guidelines contains a model template for the Country-by-Country Report together with its accompanying instructions ...

The Country-by-Country Report will be helpful for high-level transfer pricing risk assessment purposes. It may also be used by tax administrations in evaluating other BEPS related risks and where appropriate for economic and statistical analysis. However, the information in the Country-by-Country Report should not be used as a substitute for a detailed transfer pricing analysis of individual transactions and prices based on a full functional analysis and a full comparability analysis. The information in the Country-by-Country Report on its own does not constitute conclusive evidence that transfer prices are or are not appropriate. It should not be used by tax administrations to propose transfer pricing adjustments based on a global formulary apportionment of income ...

The Country-by-Country Report requires aggregate tax jurisdiction-wide information relating to the global allocation of the income, the taxes paid, and certain indicators of the location of economic activity among tax jurisdictions in which the MNE group operates. The report also requires a listing of all the Constituent Entities for which financial information is reported, including the tax jurisdiction of incorporation, where different from the tax jurisdiction of residence, as well as the nature of the main business activities carried out by that Constituent Entity ...

Proposal directive of public country-by-country reporting in the EU Ministers held an exchange of views (public session) on how to take the proposed directive forward. Tax transparency is a fundamental principle in any democratic society. It enables policy makers to take informed decisions and to ensure that all economic actors contribute in a fair and equitable manner to the economy of the various countries where they conduct their business. Today’s debate has opened the way for the proposed directive to move forward as a matter of priority. Pedro Siza Vieira, Portuguese Minister of State for the Economy and Digital Transition A clear majority of ministers were of the view that the latest consolidated presidency proposal is technically mature. They invited the Portuguese presidency to seek a negotiating mandate without delay in order to explore with the European Parliament the possibility of a deal for the swift adoption of the directive. The Portuguese presidency concluded that there was political support for it to seek a negotiating mandate in order to explore with the European Parliament the possibility of a deal for the swift adoption of the proposed directive. (Source: European Council) ...

In this case a group of taxpayers filed a lawsuit for the nullity of the new Mexican transfer pricing documentation obligations introduced in 2017 by rules 3.9.11, 3.9.14, 3.9.15, 3.9.16 and 3.9.17 of the First Resolution of Amendments to the Tax Miscellaneous published in the Official Gazette of the Federation, issued by the Head of the Tax Administration Service. Article 76-A of the Mexican Income Tax Law states that the taxpayers referred to in Article 32-H, Sections I, II, III and IV of the Federal Tax Code who enter into transactions with related parties must provide the tax authorities with annual related party information returns: 1) master file; 2) local file and 3) a country-by-country report. This three tiered documentation package provides the tax authorities with information related to transactions between related parties on transfer pricing, in order to identify conduct that could imply a risk of tax avoidance or evasion, improve the exchange of information with authorities of the same nature at the international level and carry out economic and statistical analyses. Supreme Court Judgement The Supreme Court predominantly dismissed the claim of unlawfulness of the Mexican documentation obligations. Click here for English Translation Click here for other translation ...

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 ...

Tax authorities in the EU have agreed to cooperate more closely and exchange information so as to be able to apply their taxes correctly and combat tax fraud and tax evasion. Exchange of Information within the EU is based on Council Directive 2011/16/EU. The Directive and the later amendments in DAC 2 – 6 provides for exchange of information in three forms: spontaneous, automatic and on request. Spontaneous exchange of information takes place if a country discovers information on possible tax evasion relevant to another country, which is either the country of the income source or the country of residence. Exchange of information on request is used when additional information for tax purposes is needed from another country. Automatic exchange of information (AEOI) is activated in a cross-border situation, where a taxpayer is active in another country than the country of residence. In such cases tax administrations provide automatically tax information to the residence country of the taxpayer, in electronic form on a periodic basis. The Directive provides for mandatory exchange of five categories of income and assets: employment income, pension income, directors fees, income and ownership of immovable property and life insurance products. The scope has later been extended to financial account information, cross-border tax rulings and advance pricing arrangements, country by country reporting and tax planning schemes. These amendments which extend the application of the original Directive are loosely based on the common global standards agreed by tax administrations at international level, notably at the OECD. However, they sometimes go further and importantly they are legislative rather than being based on political agreement without legislative force. The table below shows the main content of the  Directives (DAC 1-6) and when exchanges started or will start to take place. An unofficial consolidated version of the original Directive and the five amendments (DAC 1-6) ...

The Handbook on Effective Tax Risk Assessment explores how information contained in CbC reports can be used for risk assessment and which types of tax risk indicators that may be identified using the information contained in CbC Reports. In chapter 4 some of the main tax risk indicators that may be identified using CbC Reports are described: The footprint of a group in a particular jurisdiction A group’s activities in a jurisdiction are limited to those that pose less risk There is a high value or high proportion of related party revenues in a particular jurisdiction The results in a jurisdiction deviate from potential comparable The results in a jurisdiction do not reflect market trends There are jurisdictions with significant profits but little substantial activity There are jurisdictions with significant profits but low levels of tax accrued There are jurisdictions with significant activities but low levels of profit (or losses) A group has activities in jurisdictions which pose a BEPS risk A group has mobile activities located in jurisdictions where the group pays a lower rate or level of tax There have been changes in a group’s structure, including the location of assets Intellectual property (IP) is separated from related activities within a group A group has marketing entities located in jurisdictions outside its key markets A group has procurement entities located in jurisdictions outside its key manufacturing locations Income tax paid is consistently lower than income tax accrued A group includes dual resident entities A group includes entities with no tax residence A group discloses stateless revenues Information in a group’s CbC Report does not correspond with information previously provided by a constituent entity According to the OECD, combiantions of thise 19 indicators can provide a general overview of the main tax risks of a MNE Group ...

Annex IV to Chapter V Country-by-Country Reporting Implementation Package Introduction In order to facilitate a consistent and swift implementation of the Country-by-Country Reporting developed under Action 13 of the Base Erosion and Profit Shifting Action Plan (BEPS Action Plan, OECD, 2013), a Country-by-Country Reporting Implementation Package has been agreed by countries participating in the OECD/G20 BEPS Project. This implementation package consists of (i) model legislation which could be used by countries to require the ultimate parent entity of an MNE group to file the Country-by-Country Report in its jurisdiction of residence including backup filing requirements and (ii) three model Competent Authority Agreements that are to be used to facilitate implementation of the exchange of Country-by-Country Reports, respectively based on the 1) Convention on Mutual Administrative Assistance in Tax Matters, 2) bilateral tax conventions and 3) Tax Information Exchange Agreements (TIEAs). It is recognised that developing countries may require support for the effective implementation of Country-by-Country Reporting. 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 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. In the context of the Common Reporting Standard, this requirement has been translated into a Multilateral Competent Authority Agreement, which defines the scope, timing, procedures and safeguards according to which the automatic exchange should take place. 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 Country-by-Country Reports in place. Therefore, the Multilateral Competent Authority Agreement on the Exchange of Country-by-Country 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 Country-by-Country Reports, one for exchanges under Double Tax Conventions and one for exchanges under Tax Information Exchange Agreements. In line with paragraph 5 of Chapter V of these Guidelines, one of the three objectives of transfer pricing documentation is to provide tax administrations with the information necessary to conduct an informed transfer pricing risk assessment, while paragraph 10 of Chapter V of these Guidelines states that effective risk identification and assessment constitute an essential early stage in the process of selecting appropriate cases for transfer pricing audit. The Country-by-Country Reports exchanged on the basis of the model competent authority agreements contained in the present Country-by-Country Reporting Implementation Package, represent one of the three tiers of the transfer pricing documentation and will, in accordance with paragraphs 16, 17 and 25 of Chapter V of these Guidelines, provide tax administrations with relevant and reliable information to perform an efficient and robust transfer pricing risk assessment analysis. Against that background, the model competent authority agreements aim to provide the framework to make the information contained in the Country-by-Country Report available to concerned tax authorities, such information being foreseeably relevant for the administration and enforcement of their tax laws through the automatic exchange of information. 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 Country-by-Country 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. For most provisions, the wording is substantially the same as the text of the Multilateral Competent Authority Agreement for the purpose of exchanges under the Common Reporting Standard. Where appropriate, the wording has been complemented or amended to reflect the Guidance on Country-by-Country Reporting set out in Chapter V of these Guidelines. As a next step, it is intended that an XML Schema and a related User Guide will be developed with a view to accommodating the electronic exchange of Country-by-Country Reports. Model legislation related to Country-by-Country Reporting Article 1 Definitions For purposes of this [title of the law] the following terms have the following meanings: The term “Group” means a collection of enterprises related through ownership or control such that it is either required to prepare Consolidated Financial Statements for financial reporting purposes under applicable accounting principles or would be so required if equity interests in any of the enterprises were traded on a public securities exchange. The term “MNE Group” means any Group that (i) includes two or more enterprises the tax residence for which is in different jurisdictions, or includes an enterprise that is resident for tax purposes in one jurisdiction and is subject to tax with respect to the business carried out through a permanent establishment in another jurisdiction, and (ii) is not an Excluded MNE Group. The term “Excluded MNE Group” means, with respect to any Fiscal Year of the Group, a Group having total consolidated group revenue of less than [750 million Euro]/[insert an amount in local currency approximately equivalent to 750 million Euro as of January 2015] during the Fiscal Year immediately preceding the Reporting Fiscal Year as reflected in its Consolidated Financial Statements for such preceding Fiscal Year. The term “Constituent Entity” means (i) any separate business unit of an MNE Group that is included in the Consolidated Financial Statements of the MNE Group for financial reporting purposes, or would be so ...

Annex III to Chapter V Transfer Pricing Documentation – Country-by-Country Report A. Model template for the Country-by-Country Report Table 1. Overview of allocation of income, taxes and business activities by tax jurisdiction Table 2. List of all the Constituent Entities of the MNE group included in each aggregation per tax jurisdiction Please specify the nature of the activity of the Constituent Entity in the Additional Information” section. Table 3. Additional Information B. Template for the Country-by-Country Report – General instructions Purpose This Annex III to Chapter V of these Guidelines contains a template for reporting a multinational enterprise’s (MNE) group allocation of income, taxes and business activities on a tax jurisdiction-by-tax jurisdiction basis. These instructions form an integral part of the model template for the Country-by-Country Report. Definitions Reporting MNE A Reporting MNE is the ultimate parent entity of an MNE group. Constituent Entity For purposes of completing Annex III, a Constituent Entity of the MNE group is (i) any separate business unit of an MNE group that is included in the Consolidated Financial Statements of the MNE group for financial reporting purposes, or would be so included if equity interests in such business unit of the MNE group were traded on a public securities exchange; (ii)   any such business unit that is excluded from the MNE group’s Consolidated Financial Statements solely on size or materiality grounds; and (iii)  any permanent establishment of any separate business unit of the MNE group included in (i) or (ii) above provided the business unit prepares a separate financial statement for such permanent establishment for financial reporting, regulatory, tax reporting, or internal management control purposes. Treatment of Branches and Permanent Establishments The permanent establishment data should be reported by reference to the tax jurisdiction in which it is situated and not by reference to the tax jurisdiction of residence of the business unit of which the permanent establishment is a part. Residence tax jurisdiction reporting for the business unit of which the permanent establishment is a part should exclude financial data related to the permanent establishment. Consolidated Financial Statements The Consolidated Financial Statements are the financial statements of an MNE group in which the assets, liabilities, income, expenses and cash flows of the ultimate parent entity and the Constituent Entities are presented as those of a single economic entity. Period covered by the annual template The template should cover the fiscal year of the Reporting MNE. For Constituent Entities, at the discretion of the Reporting MNE, the template should reflect on a consistent basis either (i) information for the fiscal year of the relevant Constituent Entities ending on the same date as the fiscal year of the Reporting MNE, or ending within the 12 month period preceding such date, or (ii) information for all the relevant Constituent Entities reported for the fiscal year of the Reporting MNE. Source of data The Reporting MNE should consistently use the same sources of data from year to year in completing the template. The Reporting MNE may choose to use data from its consolidation reporting packages, from separate entity statutory financial statements, regulatory financial statements, or internal management accounts. It is not necessary to reconcile the revenue, profit and tax reporting in the template to the consolidated financial statements. If statutory financial statements are used as the basis for reporting, all amounts should be translated to the stated functional currency of the Reporting MNE at the average exchange rate for the year stated in the Additional Information section of the template. Adjustments need not be made, however, for differences in accounting principles applied from tax jurisdiction to tax jurisdiction. The Reporting MNE should provide a brief description of the sources of data used in preparing the template in the Additional Information section of the template. If a change is made in the source of data used from year to year, the Reporting MNE should explain the reasons for the change and its consequences in the Additional Information section of the template. C. Template for the Country-by-Country Report – Specific instructions Overview of allocation of income, taxes and business activities by tax jurisdiction (Table 1) Tax Jurisdiction In the first column of the template, the Reporting MNE should list all of the tax jurisdictions in which Constituent Entities of the MNE group are resident for tax purposes. A tax jurisdiction is defined as a State as well as a non-State jurisdiction which has fiscal autonomy. A separate line should be included for all Constituent Entities in the MNE group deemed by the Reporting MNE not to be resident in any tax jurisdiction for tax purposes. Where a Constituent Entity is resident in more than one tax jurisdiction, the applicable tax treaty tie breaker should be applied to determine the tax jurisdiction of residence. Where no applicable tax treaty exists, the Constituent Entity should be reported in the tax jurisdiction of the Constituent Entity’s place of effective management. The place of effective management should be determined in accordance with the provisions of Article 4 of the OECD Model Tax Convention and its accompanying Commentary. Revenues In the three columns of the template under the heading Revenues, the Reporting MNE should report the following information: (i) the sum of revenues of all the Constituent Entities of the MNE group in the relevant tax jurisdiction generated from transactions with associated enterprises; (ii) the sum of revenues of all the Constituent Entities of the MNE group in the relevant tax jurisdiction generated from transactions with independent parties; and (iii) the total of (i) and (ii). Revenues should include revenues from sales of inventory and properties, services, royalties, interest, premiums and any other amounts. Revenues should exclude payments received from other Constituent Entities that are treated as dividends in the payor’s tax jurisdiction. Profit (Loss) before Income Tax In the fifth column of the template, the Reporting MNE should report the sum of the profit (loss) before income tax for all the Constituent Entities resident for tax purposes in the relevant tax jurisdiction. The ...

Annex III to Chapter V of these Guidelines contains a model template for the Country-by-Country Report together with its accompanying instructions ...

The Country-by-Country Report will be helpful for high-level transfer pricing risk assessment purposes. It may also be used by tax administrations in evaluating other BEPS related risks and where appropriate for economic and statistical analysis. However, the information in the Country-by-Country Report should not be used as a substitute for a detailed transfer pricing analysis of individual transactions and prices based on a full functional analysis and a full comparability analysis. The information in the Country-by-Country Report on its own does not constitute conclusive evidence that transfer prices are or are not appropriate. It should not be used by tax administrations to propose transfer pricing adjustments based on a global formulary apportionment of income ...

The Country-by-Country Report requires aggregate tax jurisdiction-wide information relating to the global allocation of the income, the taxes paid, and certain indicators of the location of economic activity among tax jurisdictions in which the MNE group operates. The report also requires a listing of all the Constituent Entities for which financial information is reported, including the tax jurisdiction of incorporation, where different from the tax jurisdiction of residence, as well as the nature of the main business activities carried out by that Constituent Entity ...