New Guidance on the implementation of Country by Country Reporting


The next 31st December,2017 is the deadline to submit the Country by Country reporting for the taxpayers that are bound to complete it and their fiscal year ended on 31st December, 2016.

Country by Country reporting applies to multinational enterprises groups with an annual consolidated group revenue of EUR 750 million or more (or near equivalent in local currency) in the immediately preceding fiscal year. The headquarters or the companies appointed by the headquarters are, usually, the responsible for the submission of this report.

This report contains a lot of important and valuable financial data for the tax administrations, since they can obtain relevant information at a glance. This information is related to i) the revenues; (ii) the profit (loss) before income tax; (iii) the income tax paid (on cash basis); (iv) the income tax accrued (current year); (v) the stated capital; (vi) the accumulated earnings; (vii) the number of employees and (viii) the tangible assets other than cash and cash equivalents of all the entities located in the same tax jurisdiction. This information must be filled in the table 1 of the report.

Additionally, the Table 2 of the document includes a list of all the entities of the multinational group included in each aggregation per tax jurisdiction and their main activities.

So, the information provided by these two tables is very useful for the tax administrations to know the amount of the revenues and the profit obtained in each country as well as the business activity of each company of each tax jurisdiction. So, the tax administration could question a situation where two companies of the same group are located in different countries and carry out the same activity but obtain completely different results, since they assume that two entities that develop the same activity should get similar results.

In relation to the preparation of the Country by Country reporting, the OCED has published the following documents:

  1. Final report of Action 13 of BEPS project (October 2015);
  2. A guidance on the appropriate use of information contained in Country by Country reports (September 2017);
  3. A guidance on the implementation of Country by Country reporting (updated November 2017).

The last guidance, published on 30th November 2017 includes the following:

  1. How to report amounts taken from financial statements prepared using fair value accounting;
  2. How to treat a negative figure for accumulated earnings in Table 1;
  3. How to treat mergers/acquisitions/de-mergers;
  4. How to treat short accounting periods; and
  5. The definition of the total consolidated group revenue to know if a group must prepare the Country by Country report.

With this new guide, the OCED aims to clarify and improve the documents that were initially developed for the preparation of the Country by Country reporting and solve the problems to complete the report for the taxpayers.

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