Organization for economic co-operation and development (OECD) base erosion and profit sharing shift project
Recent updatesIn February 2015, the U.S. government announced it will adopt a template for country-by-country reporting, citing Internal Revenue Code Sections 6001 and 6038(a) as the authority for soliciting this level of information from US multinational corporations (“MNEs”). The US will share this form with other tax administrations under bilateral tax treaties and tax information exchange agreements (“TIEAs”).
While it is unclear, today, how these guidelines will be implemented by OECD countries or how many countries will adopt these initiatives into the local rules (in whole or in part) the timing of the CbC requirement for taxpayers who meet the threshold is December 31, 2017.
What are some things I should be looking at and what can I do to be prepared?MNEs with greater than €750 million euros (estimated $835 million) in global sales should contemplate the impact such CbC reporting will have on its filing requirements. We recommend our clients consider a “CbC Diagnostic” to ensure the necessary information can be accurately captured through existing technology/information systems and to help facilitate a timely response by the filing requirement (December 31, 2017).
Transitioning to the new reporting regime may be a complex and sometimes confusing process for MNEs; the results of a CbC Diagnostic will not only provide a readiness test, but also provide a risk assessment with respect to certain related party transactions that may appear to lack business purpose or economic substance.