Country-by-Country implementation guidance | KPMG | AU
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Country-by-Country implementation guidance

Country-by-Country implementation guidance

Jane Rolfe, Partner, Transfer Pricing, discusses the implementation of Country-by-Country reporting.


Partner, Transfer Pricing

KPMG Australia


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With many multi-national enterprises (MNEs) now in their first year of Country-by-Country (CbC) reporting, a number of questions are emerging on implementation.

On 30 June 2016, the Organisation for Economic Co-operation and Development (OECD) released guidance on the implementation of CbC reporting. The issues covered in the guidance and our observations are:

  • Transitional filing options for MNEs that voluntarily file in the 'parent' entity jurisdiction. This was in response to concerns about the 'gap' year that existed for US MNEs where CbC reporting came into effect earlier in the overseas jurisdictions. This measure now enables US MNEs to file voluntarily with the Internal Revenue Service (IRS) and have the IRS exchange the CbC report (subject to agreement) with other jurisdictions. We note, however, that this was unlikely to have been a significant issue for US MNEs with Australian operations given that the Australian Taxation Office (ATO) has already provided for a 'transitional year' exemption.
  • Guidance on the application of CbC reporting to investment funds. This recognises that if the accounting rules do not require an investment entity to consolidate investee entities then these investee entities should not be considered Constituent Entities of the MNE Group. This is particularly helpful clarification for Australian Super Funds.
  • Guidance on the application of CbC reporting to partnerships. This addresses a common question that has arisen on the tax residence of hybrid entities. 
  • The impact of exchange rate fluctuations on the EUR 750m filing threshold for MNEs. This recognises that if the parent entity jurisdiction has implemented a local currency threshold that is a near equivalent to EUR750m, an MNE group should not be exposed to local filing in any other jurisdiction that is using a threshold denominated in a different currency.

In addition to the OECD guidance, a number of jurisdictions implementing CbC reporting are issuing further guidance and/or publishing responses to frequently asked questions.

Much of the guidance provides a level of flexibility and ultimately it is for the MNE to adopt a reasonable, practical and consistent approach to CbC. The challenge for MNEs is to stay abreast of the nuances in the local adoption and guidance in the jurisdictions which they operate in.

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