Transfer Pricing Documentation and Country-by-Country (CbC) Reporting

Background Information

Transfer Pricing Documentation 

Current Status of Exchange Relationship for CbC Reporting 

TP Documents & CbC Reporting at Country Level

  • Hong Kong (China)
  • Singapore
  • United Kingdom
  • Other countries/jurisdictions

Defined Terms

  • Constituent Entity
  • Surrogate Entity
  • Reporting Entity
  • Filing Obligations
  • Notification
  • Qualifying Competent Authority Agreement

Multilateral Convention on Mutual Administrative Assistance in Tax Matters

  • The Convention
  • Multilateral Convention on the Exchange of CbC Reports (CbC MCAA)
  • List of CbC MCAA Signatories 
  • List of activated relationships for the automatic exchange of CbC Reports

     

 

 


 

 

Background

 

 

Action 13 of the Action Plan on Base Erosion and Profit Shifting (BEPS Action Plan, OECD, 2013) requires the development of "rules regarding transfer pricing documentation to enhance transparency for tax administration, taking into consideration the compliance costs for business. The rules to be developed will include a requirement that MNEs provide all relevant governments with needed information on their global allocation of the income, economic activity and taxes paid among countries according to a common template".

 

 

 

Transfer Pricing Documentation

 

 

In response to this requirement, a three-tiered standardised approach to transfer pricing documentation has been developed, as set out below:

  • a master file containing standardised information relevant for all MNE group members;
  • a local file referring specifically to material transactions of the local taxpayer; and
  • a Country-by-Country Report containing certain information relating to the global allocation of the MNE's income and taxes paid together with certain indicators of the location of economic activity within the MNE group.

See more information [here].

 


 

 

 

Update on Exchange Relationship for CbC Reporting

 

The Inclusive Framework on BEPS has released information on the current status of exchange relationship for CbC reporting around the world. 

 

 

 

Transfer Pricing Documentation and CbC Reporting at Country Level

 

 

 

 

Defined Terms

 

The terms are defined in Annex IV to Chapter V. Country-by Country Reporting Implementation Package. See page 39 to page 44 of Transfer Pricing Documentation and Country-by-Country Reporting, Action 13: 2015 Final Report, the OECD/G20 Base Erosion and Profit Shifting Project, OECD.

 

 

 

Constituent Entity

 

The term "Constituent Entity" means (i) any separate business unit of an MNE Group that is included in the Consolidated Financial Statements of the MNE Group for financial reporting purposes, or would be so included if equity interests in such business unit of an MNE Group were traded on a public securities exchange; (ii) any such business unit that is excluded from the MNE Group's Consolidated Financial Statements solely on size or materiality grounds; and (iii) any permanent establishment of any separate business unit of the MNE Group included in (i) or (ii) above provided the business unit prepares a separate financial statement for such permanent establishment for financial reporting, regulatory, tax reporting, or internal management control purposes.

 

Surrogate Entity

 

The term "Surrogate Parent Entity" means one Constituent Entity of the MNE Group that has been appointed by such MNE Group, as a sole substitute for the Ultimate Parent Entity, to file the Country-by-Country Report in that Constituent Entity's jurisdiction of tax residence, on behalf of such MNE Group, when one or more of the conditions set out in subsection (ii) of the defined term "Filing Obligations"  applies.

 

Reporting Entity

 

The term "Reporting Entity" means the Constituent Entity that is required to file a country-by-report in its jurisdiction of tax residence on behalf of the MNE Group. The Reporting Entity may be the Ultimate Parent Entity, the Surrogate Parent Entity, or any Constituent Entity as described under paragraph 2 of the defined term "Filing Obligations".

 

Filing Obligations

 

1. Each Ultimate Parent Entity of an MNE Group that is resident for tax purposes in [Country] shall file a Country-by-Country Report with the [Country Tax Administration] with respect to its Reporting Fiscal Year within in 12 months after the last day of the Reporting Fiscal Year of the MNE Group (time period specified).

2. A Constituent Entity which is not the Ultimate Parent Entity of an MNE Group shall file a CbC Report with the [Country Tax Administration] with respect to the Reporting Fiscal Year of an MNE Group of which it is a Constituent Entity before the time period specified if the following criteria are satisfied: 

(i) the entity is resident for tax purposes in [Country]; and 

(ii) one of the following conditions applies:

a) the Ultimate Parent Entity of the MNE Group is not obligated to file a Country-by-Country Report in its jurisdiction of tax residence; or,

b) the jurisdiction in which the Ultimate Parent Entity is resident for tax purposes has a current International Agreement to which [Country] is a party but does not have a Qualifying Competent Authority Agreement in effect to which [Country] is a party by the time specified for filing the Country-by-Country Report for the Reporting Fiscal Year; or,

c) there has been a Systemic Failure of the jurisdiction of tax residence of the Ultimate Parent Entity that has been notified by the [Country Tax Administration] to the Constituent Entity resident for tax purposes in [Country].

 

Where there are more than one Constituent Entities of the same MNE Group that are resident for tax purposes in [Country] and one or more of the conditions set out in subsection (ii) above apply, the MNE Group may designate one of such Constituent Entities to file the Country-by-Country Report with [Country Tax Administration] with respect to any Reporting Fiscal Year within 12 months after the last day of the Reporting Fiscal Year (time specified) and to notify the [Country Tax Administration] that the filing is intended to satisfy the filing requirement of all the Constituent Entities of such MNE Group that are resident for tax purposes in [Country].

 

Notwithstanding the provisions in the preceding paragraph, when one or more of the conditions set out in the preceding paragraph apply, an entity described in the preceding paragraph shall not be required to file a Country-byCountry Report with [Country Tax Administration] with respect to any Reporting Fiscal Year if the MNE Group of which it is a Constituent Entity has made available a Countryby-Country Report with respect to such Fiscal Year through a Surrogate Parent Entity that files that Country-by-Country Report with the tax authority of its jurisdiction of tax residence on or before the date specified and that satisfies the following conditions:

a) the jurisdiction of tax residence of the Surrogate Parent Entity requires filing of Country-by-Country Reports;

b) the jurisdiction of tax residence of the Surrogate Parent Entity has a Qualifying Competent Authority Agreement in effect to which [Country] is a party by the time specified for filing the Country-by-Country Report for the Reporting Fiscal Year;

c) the jurisdiction of tax residence of the Surrogate Parent Entity has not notified the [Country Tax Administration] of a Systemic Failure;

d) the jurisdiction of tax residence of the Surrogate Parent Entity has been notified by the Constituent Entity resident for tax purposes in its jurisdiction that it is the Surrogate Parent Entity; and

e) a notification has been provided to [Country Tax Administration].

 

Notification

 

1. Any Constituent Entity of an MNE Group that is resident for tax purposes in [Country] shall notify the [Country Tax Administration] whether it is the Ultimate Parent Entity or the Surrogate Parent Entity, no later than [the last day of the Reporting Fiscal Year of such MNE Group].

2. Where a Constituent Entity of an MNE Group that is resident for tax purposes in [Country] is not the Ultimate Parent Entity nor the Surrogate Parent Entity, it shall notify the [Country Tax Administration] of the identity and tax residence of the Reporting Entity, no later than [the last day of the Reporting Fiscal Year of such MNE Group].

 

Qualifying Competent Authority Agreement

 

The term "Qualifying Competent Authority Agreement" means an agreement (i) that is between authorised representatives of those jurisdictions that are parties to an International Agreement and (ii) that requires the automatic exchange of Country-byCountry Reports between the party jurisdictions.

 

The term "International Agreement" shall mean the Multilateral Convention for Mutual Administrative Assistance in Tax Matters, any bilateral or multilateral Tax Convention, or any Tax Information Exchange Agreement to which [Country] is a party, and that by its terms provides legal authority for the exchange of tax information between jurisdictions, including automatic exchange of such information.

 

 

Multilateral Convention on Mutual Administratvie Assistance in Tax Matters

 

The Convention on Mutual Administrative Assistance in Tax Matters ("the Convention") was developed jointly by the OECD and the Council of Europe in 1988 and amended by Protocol in 2010. The Convention is the most comprehensive multilateral instrument available for all forms of tax co-operation to tackle tax evasion and avoidance, a top priority for all countries.

 

The Convention on Mutual Administrative Assistance in Tax Matters (the "Convention"), by virtue of its Article 6, requires the Competent Authorities of the Parties to the Convention to mutually agree on the scope of the automatic exchange of information and the procedure to be complied with. Against that background, the Multilateral Competent Authority Agreement on the Exchange of CbC Reports (the "CbC MCAA") has been developed, based on the Convention. 

 

See additional information: