The Organisation for Economic Cooperation and Development (OECD) released additional interpretative guidance for implementation and operation of country-by-country (CbC) reporting pursuant to base erosion and profit shifting (BEPS) Action 13.
As noted in the OECD release, the new guidance includes questions and answers about several topics including:
This guidance also reflects the complete set of guidance concerning the interpretation and operation of BEPS Action 13 issued to date.
In addition, the OECD provided a summary of common errors made by MNE groups in preparing CbC reports. The aim is to help MNE groups avoid these errors and assist tax administrations in detecting them when they occur.
Treatment of dividends in Table 1
The OECD clarified that payments received from other constituent entities that are treated as dividends in the payer's tax jurisdiction are excluded from "Profit (Loss) before Income Tax" in Table 1, "Overview of allocation of income, taxes and business activities by tax jurisdiction" consistent with the exclusion of these amounts in "Revenue.” This guidance applies to all reporting fiscal years of multinational groups that commence on or after 1 January 2020, with earlier adoption encouraged. The OECD noted that this guidance replaces previous guidance that it issued in September 2018.
Shortened or rounded amounts in Table 1
The OECD confirmed that its reporting guidance specifies that multinationals should use the full financial amounts when completing Table 1, as shortened amounts are not acceptable. However, the OECD noted that some jurisdictions may accept a reasonable level of rounding, even though is not required to accept any rounding. The OECD said it will monitor the use of rounded amounts and may revisit this guidance in the future.
Source of information in Table 3
The OECD advised that although a multinational group may provide a brief description of the sources of data used in Table 3, "Additional information" the description must be sufficient to enable an understanding of the source of each item of information. Further, the description must provide an explanation when information relevant to a particular jurisdiction is taken from multiple sources of data, or when those sources change over time.
Additional administrative guidance
In the revised guidance, the OECD identified common issues that multinational groups have made when preparing their CbC reports. In the guidance and an additional chart, the OECD outlines 14 reporting errors that tax administrations have encountered, alongside how the information was to have been reported as referenced in other OECD publications.
Additional OECD comments
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