OECD’s first peer reviews of country by country reporting initiatives

The OECD has released the first peer reviews of the operation of the country by country reporting (CBCR) measures resulting from its base erosion and profit shifting (BEPS) project, which show that practically all countries that serve as headquarters to the large multinationals covered by the initiative have introduced new reporting obligations compliant with transparency requirements

The first annual peer review focuses mainly on the domestic legal and administrative framework, and reflects implementation as of January 2018. It is part of a phased approach which gradually monitors the domestic legal and administrative framework, the exchange of information framework, and the confidentiality and appropriate use conditions over three annual reviews.

The review provides a comprehensive examination of 95 jurisdictions that are members of the inclusive framework. It found 60 jurisdictions have already introduced legislation to impose a filing obligation on multinational groups, thus covering almost all those expected to be in scope. The remaining jurisdictions are working towards finalising their domestic legal framework with the support of the OECD.

Where legislation is in place, the implementation of CBCR has been found largely consistent with the BEPS action 13 minimum standard. Some jurisdictions have received recommendations for improvement on certain specific aspects of their legislation and work has already begun to bring the provisions concerned in line with the standard.

In the case of the UK, the review notes that its implementation of action 13 meets all requirements except in one instance. This relates to the annual consolidated revenue threshold calculation rule in response of multinational groups whose ultimate parent entity is located in a jurisdiction other than the UK.

The OECD’s assessment is that this may deviate from its guidance. Although this appears to be unintended, a technical reading of the provision could lead to local filing requirements which are inconsistent with the action 13 standard. Having notified the UK of this, the OECD says it will continue to monitor this to ensure it remains consistent with OECD guidance on currency fluctuations.

Action 13 requires the largest multinational enterprise groups to provide the global allocation of their income, taxes and other indicators of the location of economic activity. CBCR, with exchanges slated to begin in June 2018, will see tax administrations worldwide collect and share this information. More than 1400 bilateral relationships are already in place for CBCR exchanges, with more to come throughout the year.

OECD’s second annual peer review, covering all members of the inclusive framework, was launched in April 2018. It will focus on the exchange of information aspects, as well as the confidentiality and appropriate use conditions.

Pascal Saint-Amans, director of the OECD Centre for Tax Policy and Administration, said: ‘The peer review outcomes and the launch of the global exchange of CbC reports in June shows that the BEPS measures are being implemented rapidly, consistently and globally.’

Country by country reporting – compilation of peer review reports, phase 1 is here.

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