The first CbC reports should be filed for groups’ fiscal years beginning on or after 1 January 2016, within 12 months of the year end.
CbC reports are only required where consolidated group revenue in the prior fiscal year is €750m or more. Obtaining and using the CbC report must be underpinned by confidentiality, consistency and appropriate use.
The CbC report must be filed with the tax authorities in the country of residence of the group’s ultimate parent. In addition, groups will have to provide transfer pricing documentation in the form of: (a) a master file containing standardised information for all group members; and (b) a local file on specific transactions, in both cases in the relevant country for each group member. This could prove to be a major headache as far as some countries are concerned.
Concerns for business
Affected businesses will need a process to comply with their reporting obligations. They will need to get buy-in from different parts of the organisation, and in particular from the central and local finance teams. The process is likely to consist of gathering, verifying and auditing a range of information. An immediate question is whether the business has enough resources to cope, but there are other issues. Who will carry out the relevant tasks? Are more people needed? What is the lead time to put the necessary procedures and systems in place? Is it possible to access data from a central database, or must information be obtained locally? Could the process be built into the audit or financial reporting cycle? How could it fit in with the tax computations or management reporting? Can the CbC report be reconciled with statutory accounts (although not strictly required)? Will it be legally possible to provide all the information required? In some countries, it might not be.
Confidentiality will also be a concern for many groups. Although all countries participating in the BEPS project have agreed to enforce the confidentiality of reported information, the likelihood of ‘tax leaks’ is now greater than it has ever been, as we have seen with the ‘Lux leaks’ and more recently the accounts of HSBC customers. Will all tax authorities respect the protections? Some campaigners have argued for the information in a CbC report to be publicly available. There is a real danger that some of it will end up in the public domain.
The €750m threshold will exempt many groups from the reporting requirements. Those within the scope, however, need to galvanise their organisations and address some fundamental questions in order to be ready to make their first report.
The first CbC reports should be filed for groups’ fiscal years beginning on or after 1 January 2016, within 12 months of the year end.
CbC reports are only required where consolidated group revenue in the prior fiscal year is €750m or more. Obtaining and using the CbC report must be underpinned by confidentiality, consistency and appropriate use.
The CbC report must be filed with the tax authorities in the country of residence of the group’s ultimate parent. In addition, groups will have to provide transfer pricing documentation in the form of: (a) a master file containing standardised information for all group members; and (b) a local file on specific transactions, in both cases in the relevant country for each group member. This could prove to be a major headache as far as some countries are concerned.
Concerns for business
Affected businesses will need a process to comply with their reporting obligations. They will need to get buy-in from different parts of the organisation, and in particular from the central and local finance teams. The process is likely to consist of gathering, verifying and auditing a range of information. An immediate question is whether the business has enough resources to cope, but there are other issues. Who will carry out the relevant tasks? Are more people needed? What is the lead time to put the necessary procedures and systems in place? Is it possible to access data from a central database, or must information be obtained locally? Could the process be built into the audit or financial reporting cycle? How could it fit in with the tax computations or management reporting? Can the CbC report be reconciled with statutory accounts (although not strictly required)? Will it be legally possible to provide all the information required? In some countries, it might not be.
Confidentiality will also be a concern for many groups. Although all countries participating in the BEPS project have agreed to enforce the confidentiality of reported information, the likelihood of ‘tax leaks’ is now greater than it has ever been, as we have seen with the ‘Lux leaks’ and more recently the accounts of HSBC customers. Will all tax authorities respect the protections? Some campaigners have argued for the information in a CbC report to be publicly available. There is a real danger that some of it will end up in the public domain.
The €750m threshold will exempt many groups from the reporting requirements. Those within the scope, however, need to galvanise their organisations and address some fundamental questions in order to be ready to make their first report.
