Preparation of a Country-by-Country Report in accordance with BEPS13 requirements
Who should file a Country-by-Country Report?
A Country-by-Country Report (CbCR) is filed by the ultimate parent entity of a multinational enterprise group (MNE Group) in the jurisdiction of the ultimate parent entity’s location or by the MNE Group’s surrogate entity in the jurisdiction of the location of the MNE Group’s surrogate entity. The report contains information on the financial performance, the MNE Group’s headcount with a breakdown into tax jurisdictions of its presence and information on the main activities of each constituent entity of the MNE Group pursuant to subparagraphs 1, 3 of article 105.16-6 of the RTC according to the prescribed format in electronic form only. The submission of CbCR has been mandatory since 2017.
According to paragraph 2 of article 105.16-3 of the RTC, if the ultimate parent entity or the surrogate entity of an MNE Group is a resident of the Russian Federation, the CbCR must be submitted by the ultimate parent entity or the surrogate entity of the MNE Group.
If the ultimate parent entity of the MNE Group is a non-resident of the Russian Federation, the Russian taxpayer has the right not to submit the CbCR, provided the conditions listed in paragraph 6 of article 105.16-3 of the RTC are met. In particular:
- Tax authorities may request a CbCR as part of electronic data exchange in the jurisdiction of the ultimate parent entity if it has established similar requirements for filing CbCR and has an effective agreement on automatic exchange of information with the Russian Federation. As of 2020, more than 2,500 international agreements were concluded on the exchange of information between jurisdictions that exchange CbCRs, including among EU member states in accordance with the EU Council Directive 2016/881/EU.
- Tax authorities may request a CbCR under the secondary filing procedure (resubmission) in the absence of an agreement on automatic exchange of information between the Russian Federation and the jurisdiction of the ultimate parent entity. Thus, Russian taxpayers that are part of an MNE Group whose ultimate parent entities are registered in the USA, Canada, and the BVI, should resubmit a CbCR.
The deadline for filing a CbCR is no later than 12 months from the date the MNE Group’s fiscal year ends.
The period of voluntary filing of a CbCR under the secondary filing procedure is 12 months after the MNE Group’s fiscal year ends. If a company decides not to file a CbCR under the secondary filing procedure, it may receive a request from the tax authorities to provide a CbCR. The deadline for filing the report is determined by the tax authority additionally, but may not be less than 3 months from the date the taxpayer receives the request.
Since 2020, failure to file a CbCR or filing of incorrect information results in a fine of RUB 100,000.
- Turnkey preparation of a CbCR and analysis of indicators from a CbCR that are included in tax authorities’ calculations when selecting inspection targets.
- Methodological support for the preparation of a CbCR and/or analysis of the prepared CbCR for compliance with the requirements of the RTC.
- Adaptation of a CbCR (as part of the secondary filing procedure) prepared in other tax jurisdictions, in accordance with the requirements of the RTC in the XML format for filing to the Russian tax authorities.
- Automation of the process of preparing a CbCR based on an automated solution KPMG BEPS Automation Tool.
- Conversion of a CbCR into the XML format for the purposes of various tax jurisdictions.
- Preparation of an analytical presentation with calculated indicators and a risk map based on the OECD Handbook on Effective Tax Risk Assessment.
Since 2017, KPMG has an experienced team of professionals specializing in the preparation of CbCRs and the preparation of notifications on participation in MNE Groups in accordance with BEPS13 requirements based on the developed IT solution KPMG BEPS Automation Tool. Since 2017, KPMG specialists have successfully prepared more than 100 CbCRs on a turnkey basis, and more than 50 reports for the secondary filing procedure.