Multinational enterprises (MNEs) with a consolidated turnover of more than EUR 750 million (or equivalent in other currency) are required to annually file a Country-by-Country Report (CbCR) within 12 months after the reporting year. Preparing the CbCR may place significant pressure on an MNE’s IT systems and operations. How do you prepare your organization for the annual CbCR-process?
CbCR requires MNEs to provide information on their global allocation of profit, taxes paid, and certain indicators of economic activity among the countries in which they operate. MNEs are required to report in each tax jurisdiction in which they do business. To prepare for the annual CbCR process, several considerations need to be made.
CbCR regulations can deviate per country, as well as the requirements for digital formats. Distinguishing which entities are part of the MNE group for CbCR purposes can be complicated (for example, following a merger and acquisition deal). It is possible that an MNE will need to file CbCRs separately in multiple countries. Therefore, it is important to make sure the data is consistent and aligns globally. Failure to fulfil the CbCR requirements can result in sanctions, including fines and potentially imprisonment.
As CbCR data can be a starting point for (risk) assessments by tax authorities on their view of the (correct) transfer pricing, it is crucial to align the CbCR data with the MNE’s transfer pricing policy and documentation (Master File and Local File). Is the outcome of CbCR aligned with the company’s tax risk profile, as well as the internal expectations of where value is created?
Given that the Dutch tax authorities ask questions based on the first data provided, many companies choose to plan their responses to CbCR on a yearly basis. Engagement at the board level early on is crucial in this regard. The CbCR process can become a significant time consuming issue for senior management, due to the burden of complying with detailed data requests and the sensitivity of the information involved. Our experts support and closely collaborate with MNEs regarding the considerations mentioned above.
After CbCR is provided to the tax authorities, automatic exchange of CbCR data to other applicable tax authorities is possible. In 2016, the Netherlands agreed to the automatic exchange of CbCR data, along with thirty other countries. For many companies this means that filing the CbCR only has to be done in one tax jurisdiction and subsequently will be exchanged with the other tax jurisdictions. We can help you determine if your CbCR is exchanged with all the necessary tax jurisdictions.
The European Commission (EC) published a directive requiring large multinational companies to publish key information on where they make their profits and where they pay their taxes in the EU, on a country-by-country basis. While waiting for the outcome of the EC’s assessment, several countries have already made statements against the possible public disclosure of the CbCR information. Are you aware of the wider implications if your CbCR information becomes (partly) publicly available? We can assist you in analysing this and, if necessary, align your CbCR timely, for example by including remarks in the CbCR for clarification in case of public disclosure.
Analyse whether or not CbCR is required per reporting year for an MNE group.
Support with specific questions on CbCR definitions, regulations per country, digital formats, et cetera.
Support with the preparation of CbCR templates, down to a customized level of detail, for example by conducting a workshop covering the practical aspects of preparing the CbCR.
Risk assessment on the CbCR data with respect to among others substantial transfer pricings risks. Do the CbCR outcomes match expectations from you and the tax authorities, and are the CBCR outcomes aligned with information provided to the tax authorities? With our tool to analyse CbCR data, we can perform a CbCR assessment on both a stand-alone basis, and in alignment with your transfer pricing documentation and transfer pricing policy.
Host workshops to discuss how the CbCR data ties in with your Group’s strategy and tax policy, and how it might be used for (external) reporting purposes.
Manage collaboration on CbCR across the globe, using our worldwide PwC network.