Global Tax Alert | 29 June 2016

OECD releases additional Guidance on implementation of Country-by-Country reporting

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Executive summary

On 29 June 2016, the Organisation for Economic Co-operation and Development (OECD) released additional Guidance aimed at the consistent implementation of Country-by-Country (CbC) reporting under Action 13 of the Base Erosion and Profit Shifting (BEPS) Action Plan (the Guidance). The Guidance addresses four topics:

  • Transitional filing options for multinational enterprises (MNEs) that voluntarily file in the parent company jurisdiction
  • Guidance on the application of CbC reporting to investment funds
  • Guidance on the application of CbC reporting to partnerships
  • The impact of exchange rate fluctuations on the agreed €750 million filing threshold for MNE groups

The Guidance also explains that given the nature of the CbC Reporting (i.e., one of the BEPS minimum standards), a peer review of the implementation of CbC reporting will be conducted to ensure that the implementation is timely and in accordance with the Final Report on Action 13.

Detailed discussion

As part of the OECD/G20 BEPS project, and efforts to assist a swift and consistent implementation of the final reports, the OECD released further guidance relating to Action 13 (Transfer Pricing Documentation and Country-by-Country Reporting). The Guidance addresses four issues that have resulted in discussion as to the approach to follow in certain circumstances.

Transitional and voluntary filling

The majority of countries implementing CbC reporting to date have followed the OECD recommendations and would require CbC reporting with respect to MNEs’ fiscal periods commencing on or from 1 January 2016. If the CbC report cannot be obtained from the ultimate parent’s tax authority, then most countries have secondary reporting rules in place that would require surrogate or local filing.

Some jurisdictions are in the process of implementing CbC reporting that would require reporting for periods beginning after 1 January 2016. Thus, there is a mismatch with respect to effective dates that could potentially cause multiple filing requirements during this period of transition.

To prevent this, the OECD Guidance notes that some jurisdictions may accommodate voluntary filing of CbC reports for periods commencing after 1 January 2016 by ultimate parent entities (UPEs) resident in those jurisdictions. The OECD Guidance refers to this voluntary filing as parent surrogate filing and recommends that where the constituent entity jurisdiction accepts surrogate filing and the following conditions are met, no local filing would be required:

1. The UPE has made available a CbC report to the tax authority of its jurisdiction of tax residence by the filing deadline (i.e., 12 months after the last day of the Reporting Fiscal Year of the MNE Group)

2. By the first filing deadline of the CbC report, the jurisdiction of tax residence of the UPE has a CbC reporting obligation in place (even if filing of a CbC report for the Reporting Fiscal Year in question is not required under those laws)

3. By the first filing deadline of the CbC report, a Qualifying Competent Authority Agreement is in effect between the jurisdiction of tax residence of the UPE and the local jurisdiction

4. The jurisdiction of tax residence of the UPE has not notified the Local Jurisdiction’s tax administration of a systemic failure

5. Due notifications (if and when required) have been provided, i.e. the jurisdiction of tax residence of the UPE has been notified by the UPE, and the local jurisdiction’s tax administration has been notified by a constituent entity of the MNE Group that is resident for tax purposes in the local jurisdiction.

The Guidance states that Japan, Switzerland and the United States have confirmed that they will have parent surrogate filing consistent with the OECD Guidance.

Investment funds

The OECD addresses how CbC rules apply to investment funds. The Guidance reiterates that the governing principle to determine an MNE group is to follow the accounting consolidation rules, and therefore, the treatment of investment funds will closely depend on the accounting rules.

Accordingly, if the accounting rules provide that investment entities should not consolidate investee companies, the investee companies should not form part of a group or MNE group or be considered as constituent entities of an MNE group. Conversely, if the accounting rules provide that the investee company should be consolidated, then the investee should be part of a group and should be considered as a constituent entity of the MNE Group, even where the investment entity has a controlling interest in the investee.

This analysis also applies to determining the consolidated revenue of the group.


Similarly to the treatment of investment funds, the governing principle to determine an MNE Group is to follow the accounting consolidation rules. If the accounting consolidation rules apply to a partnership, then that partnership may be a constituent entity of an MNE group subject to CbC reporting. The Guidance additionally explains that when completing the CbC report, if a partnership is not tax resident in any jurisdiction then the partnership’s items to the extent not attributable to a permanent establishment, should be included in the ‘stateless entity’ row in table 1 of the CbC report. Any partners that are also constituent entities within the MNE group should include their share of the partnership’s items in table 1 in their jurisdiction of tax residence.

Moreover, the row for stateless entities in table 2 should include a sub-row for each stateless entity including partnerships that do not have a tax residence. For a partnership included in the stateless entity category, the field entitled Tax Jurisdiction of Organisation or Incorporation if Different from Tax Jurisdiction of Residence should indicate the jurisdiction under whose laws the partnership is organised.

Finally, the Guidance points out that for the purpose of determining whether a partnership can be a UPE required to file the CbC report, the jurisdiction under whose laws the partnership is formed will govern if there is no jurisdiction of tax residence.

CbC threshold and exchanges rates

The Guidance also addresses the case of whether as a result of currency fluctuations a jurisdiction may apply a local filing requirement on a constituent entity of an MNE group headquartered in a jurisdiction where the threshold is not met. The OECD reiterates that during the BEPS project, a threshold of €750 million was agreed or a “near equivalent amount” (not defined in the guidelines) in domestic currency as of January 2015, and provided that the jurisdiction of the UPE has implemented a reporting threshold that is a near equivalent of said threshold, an MNE group that complies with this local threshold should not be exposed to local filing in any other jurisdiction that is using a threshold denominated in a different currency.


The new Guidance provides greater clarity regarding the treatment of the respective issues, with the aim of ensuring that CbC reporting is implemented consistenly. It is not clear, however, how jurisdictions whose secondary reporting rules do not permit the use of a surrogate (e.g., only require local filing) will apply this Guidance.

According to the Guidance it appears that where questions of interpretation arise that would be best addressed through common public guidance, the OECD will endeavor to make this available.

As more countries implement CbC reporting consistent with Action 13, business should keep abreast of these reporting requirements and how countries implement these new rules.

For additional information with respect to this Alert, please contact the following:

Ernst & Young Belastingadviseurs LLP, Transfer Pricing, Rotterdam
  • Ronald van den Brekel
    +31 88 407 9016
Ernst & Young LLP, International Tax Services, Washington, DC
  • Arlene S. Fitzpatrick
    +1 202 327 7284
  • Karen Kirwan
    +1 202 327 8731
Ernst & Young LLP, Global Tax Desk Network, New York, NY
  • Jose Antonio Bustos
    +1 212 773 9584
  • David Corredor-Velásquez
    +1 212 773 6259
  • Joana Dermendjieva
    +1 212 773 3106

EYG no. 01846-161Gbl