The Organisation for Economic Cooperation and Development (OECD) today released the outcomes of the second phase of peer review of the base erosion and profit shifting (BEPS) Action 13 country-by-country (CbC) reporting initiative.
According to the OECD release, the second phase of the CbC peer review status shows “strong progress in continuing efforts to improve the taxation of multinational enterprises (MNEs) worldwide.”
The second annual peer review considers implementation of the CbC reporting minimum standard by jurisdictions (measured as of April 2019) and reveals:
CbC reporting is one of the four minimum standards of the BEPS project, and requires tax administrations to collect and share detailed information on all large MNEs doing business in their country. The CbC information includes:
CbC reporting is intended to provide a level of transparency to tax administrations. As a result, tax administrations will have access to detailed information on all large MNEs doing business in their country.
Because CbC reporting is one of the four minimum standards of the BEPS project, all members of the Inclusive Framework on BEPS have committed to implement it, and to have their compliance with the standard reviewed and monitored by their peers.
Following the first exchanges of CbC reports, the OECD stated that work is underway to support the effective use of CbC reports by tax administrations in assessing transfer pricing and other BEPS-related risks.
Building on the OECD Forum on Tax Administration’s Country-by-Country Reporting: Handbook on Effective Tax Risk Assessment, an automated “tax risk evaluation and assessment tool” (TREAT) is currently being developed to help tax administrations—in particular those of developing countries—use CbC reports to identify important indicators of potential tax risk.
Other initiatives include:
The OECD anticipates that these projects will support tax administrations in using CbC reports and other data to identify areas where the tax risk posed by an MNE group is low and instead to focus resources on those issues when further attention is required.
In addition to these initiatives, work has now started on a review of the CbC reporting minimum standard, which will include a public consultation in early 2020.
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