The OECD member countries are formalising the automatic exchange of Country-by-Country (CbC) reports under the CbC MCAA with nominated partner countries.
Automatic exchanges of CbC reporting
Tax authorities of various countries have committed to more than 700 automatic exchange relationships, including those between EU member states under EU Council Directive 2016/881/EU, for exchanging CbC reports as of 2018.
CbC reports filed by a multinational group in its parent jurisdiction will be automatically exchanged with countries where the multinational operates. We have compiled some key exchange relationships established to date.
SELECTED EXCHANGE RELATIONSHIPS AS OF MAY 4, 2017
Australia
Belgium, Bermuda, Denmark, Ireland, Mexico, Norway, Netherlands, Spain, United Kingdom, Austria, Brazil, Canada, Estonia, Finland, France, Germany, Guernsey, Iceland, Isle of Man, Italy, Jersey, Liechtenstein, Mauritius, New Zealand, Norway, Slovenia, South Africa, Uruguay, Malaysia
Austria
28 EU member states, Australia, Brazil, Canada, Guernsey, Iceland, Isle of Man, Jersey, Liechtenstein, Mauritius, Mexico, New Zealand, Norway, South Africa, Uruguay, Malaysia
Belgium
28 EU member states, Australia, Mexico, Norway, Brazil, Canada, Guernsey, Iceland, Isle of Man, Jersey, Liechtenstein, Mauritius, New Zealand, South Africa, Uruguay, Malaysia
Denmark
28 EU member states, Australia, Mexico, Norway, Brazil, Canada, Guernsey, Iceland, Isle of Man, Jersey, Liechtenstein, Mauritius, New Zealand, South Africa, Uruguay
Finland
28 EU member states, Australia, Brazil, Canada, Guernsey, Iceland, Isle of Man, Jersey, Liechtenstein, Mauritius, Mexico, New Zealand, Norway, South Africa, Uruguay, Malaysia
France
28 EU member states, Australia, Brazil, Canada, Guernsey, Iceland, Isle of Man, Jersey, Liechtenstein, Mauritius, Mexico, New Zealand, Norway, South Africa, Uruguay, Malaysia
Germany
28 EU member states, Australia, Brazil, Canada, Guernsey, Iceland, Isle of Man, Jersey, Liechtenstein, Mauritius, Mexico, New Zealand, Norway, South Africa, Uruguay, Malaysia
Italy
28 EU member states, Australia, Brazil, Canada, Guernsey, Iceland, Isle of Man, Jersey, Liechtenstein, Mauritius, Mexico, New Zealand, Norway, South Africa, Uruguay, Malaysia
Netherlands
28 EU member states, Australia, Mexico, Norway, Brazil, Canada, Guernsey, Iceland, Isle of Man, Jersey, Liechtenstein, Mauritius, New Zealand, South Africa, Uruguay, Malaysia
Norway
Australia, Belgium, Denmark, Iceland, Ireland, Mexico, Netherlands, Slovenia, South Africa, Spain, United Kingdom, Austria, Brazil, Canada, Estonia, Finland, France, Germany, Guernsey, Iceland, Isle of Man, Italy, Jersey, Liechtenstein, Mauritius, New Zealand, Uruguay, Malaysia
Spain
28 EU member states, Australia, Mexico, Norway, Brazil, Canada, Guernsey, Iceland, Isle of Man, Jersey, Liechtenstein, New Zealand, South Africa, Uruguay, Malaysia
United Kingdom
27 EU member states (excluding Gibraltar), Australia, Mexico, Norway, Brazil, Canada, Iceland, Liechtenstein, Mauritius, New Zealand, South Africa, Uruguay, Malaysia
Practical Considerations For Your Business
Multinationals can expect tax authorities in all countries where they operate to have access to these CbC reports. The availability of this information to tax authorities will add another layer of complexity to compliance risks across global groups such as reviews of local tax filings in the recipient countries.
These reviews if not addressed consistently and accurately could lead to extensive discussions and disputes that have to be managed and resolved.
While most internal functions of multinationals will be focusing on the compliance aspect of enabling CbC Reporting, it is equally important to reassess the global outbound tax strategy in the lights of increased scrutiny, and be ready to defend the scrutiny with back-up documentation, processes, internal governance guidelines.
To increase the chances of a sound defensible tax position going forward, companies can start with reviewing the following aspects:
Domestic Anti-Avoidance Rules (such as the Australian MAAL and UK's Diverted Profits Tax) which may trigger taxation in the local jurisdictions
Local functional profiles to ensure that they are in line with the associated internal policies and all inconsistencies investigated and
Considering whether the local transfer pricing policies are in line with the global view and where possible to obtain bilateral advanced pricing agreements (APA) for certainty in significant tax positions.
If you would like to know more about the implications of these developments for your business, please contact us.
