31 countries have now signed a MCAA enabling the automatic exchange of CbC reports from each reporting entity between the competent authorities.
The agreement handles the exchange of CbC reports as stated in BEPS action plan 13. This action plan has amended Chapter V of the transfer pricing guidelines of the OECD. The guidelines are soft law and as such, OECD member countries are encouraged to follow these guidelines in their domestic transfer pricing practices.
CbC reporting is also part of the EU anti-tax avoidance package, which was proposed by the European Commission on 27 January 2016 and is tabled for political agreement by ECOFIN on 25 May 2016.
CbC reporting only applies for MNE Groups with a total consolidated income greater than €750,000,000. A CbC report is only required to be exchanged if both competent authorities have the MCAA in effect and their respective jurisdictions have legislation in effect that requires the filing of CbC reports with respect to the fiscal year to which the CbC report relates.
Countries that have currently implemented CbC reporting are Switzerland, Australia, China, Ireland, Mexico, South Africa, Denmark, Spain, Poland, USA (the IRS), United Kingdom, Norway, the Netherlands and Luxembourg. More countries are expected to follow this year. Some domestic law imposes the reporting obligation for book years as of 1 January 2016 and others from 1 January 2017.
In addition to current transfer pricing documentation, the ultimate parent entity or a surrogate parent entity of an MNE group must annually report the information as in Annex III to Chapter V for the CbC reports to their tax administration. Filing needs to be done in relation to fiscal years beginning 1 January 2016, 12 months after the closing of the fiscal year. The exchange between the competent authorities needs to take place within 15 months of the closing of the fiscal year.
