Country by country reporting
Does your company have a consolidated turnover of more than 750 million euros? If you can answer yes to this question, then the following is relevant to your business.
The three-tiered approach
As of January 2022, the OECD updated its transfer pricing guidelines for multinationals to align with the recommendations of the BEPS project. Since this update the guidelines include a three-tiered approach for transfer pricing documentation. This three-step approach includes the documentation of a master file, local files and a country-by-country report.
The country-by-country report is an important document for meeting transfer pricing documentation requirements. It is an annual requirement, including the related annual notifications. The reporting entity must submit a country-by-country report to the tax authorities where the reporting entity is established. The report provides information by country that allows for the assessment of high-level transfer pricing risks.
Regulations regarding CbCR to keep in mind
- CbC reports must be completed 12 months after the fiscal year has ended, starting with the first financial year after 2016.
- Only required for MNEs with a consolidated turnover of more than 750 million euros in the previous year(or equivalent in another currency).
- CbCR regulations and notification requirements may vary from country to country.
The importance of CbCR
For tax authorities, CbCR data can serve as a starting point for transfer pricing risk analyses, therefore it is crucial to align CbCR data with your transfer pricing documentation and policy. Due to the burden of complying with detailed data requests and the sensitivity of the data involved, preparing the CbCR can be time consuming. If you do not comply, you may face negative consequences such as severe penalties and questions from tax authorities. Therefore, the CbCR is important to prevent the potential negative consequences of non-compliance.
How Quantera Global may be of service
To ensure your company is compliant, Quantera Global can assist you.
We can compile the full transfer pricing documentation, but reviewing and refining current documentation is also an option. More specifically, we can assist with:
- Analysing your company’s CbCR requirements
- Filing of CbCR and support in the notifications
- Support with specific questions on CbCR matters, such as digital formats
- Risk analysis and review of current CbCR