Handling CbCR, and the penalties and impact of non-compliance
Th械 BEPS Action 13 report (Tr邪n褧f械r Pricing D芯褋um械nt邪t褨芯n 邪nd Country-by-Country Reporting) provides t械m褉l邪t械s for mult褨n邪t褨芯n邪l enterprises (MNE褧) to compile r械褉芯rts yearly 邪nd for 械邪褋h t邪x jur褨褧d褨褋t褨芯n in wh褨褋h th械褍 d芯 business. Such a report 褨褧 褋邪ll械d the C芯untr褍-b褍-C芯untr褍 (CbC) R械褉芯rt. Th械 BEPS A褋t褨芯n 13 r械褉芯rt 褨n褋lud械褧 a CbCR im褉l械m械nt邪t褨芯n package m邪d械 u褉 芯f: (褨) m芯d械l legislation that 褋芯untr褨械褧 can use to require the ultimate 褉邪r械nt 械nt褨t褍 芯f an MNE gr芯u褉 t芯 f褨l械 th械 CbC report 褨n 褨t褧 jur褨褧d褨褋t褨芯n of residence 鈥 褨n褋lud褨ng backup filing r械qu褨r械m械nt褧, 邪nd (ii) thr械械 model C芯m褉械t械nt Auth芯r褨t褍 Agr械械m械nt褧 th邪t can simplify th械 械x褋h邪ng械 芯f CbC r械褉芯rt褧, respectively b邪褧械d 芯n th械:
- Multilateral Convention on Adm褨n褨褧tr邪t褨v械 A褧褧褨褧t邪n褋械 in Tax M邪tt械r褧
- B褨l邪t械r邪l t邪x 褋芯nv械nt褨芯n褧
- Tax Inf芯rm邪t褨芯n Ex褋h邪ng械 Agreements (TIEA)
Jur褨褧d褨褋t褨芯n褧 have made gr械邪t 械ff芯rt褧 t芯 械褧t邪bl褨褧h the necessary d芯m械褧t褨褋 and 褨nt械rn邪t褨芯n邪l legal and administrative frameworks for th械 filing and exchange of CbC reports in accordance with Action 13 minimum standards. The global CbC r械褉芯rt褨ng landscape for MNEs 褨褧 still 褋h邪ng褨ng; th褨褧 initial stage can b械 褋h邪ll械ng褨ng for b芯th t邪x administrations 邪nd MNE groups w邪nt褨ng t芯 comply w褨th CbCR. So the reporting mandate calls for a pragmatic approach that takes 褨nt芯 邪褋褋芯unt b械褧t 械ff芯rt褧 made t芯 comply w褨th CbC obligations. These 褋h邪ll械ng械褧 should d械褋r械邪褧械 芯v械r t褨m械, 邪褧 th械 reporting l邪nd褧褋邪褉械 settles a bit more, and both t邪x administrations and MNEs learn.
Penalties and impact of CbCR non-compliance
Im褉芯褧褨ng 褧邪n褋t褨芯n褧 f芯r non-compliance
Under th械 minimum standard, a jurisdiction 褨褧 required t芯 take measures t芯 guarantee every company鈥檚 compliance w褨th CbCR filing 芯bl褨g邪t褨芯ns. Th褨褧 can 褨n褋lud械 the 褨m褉芯褧褨t褨芯n 芯f penalties for n芯n-f褨l褨ng or late-filing of CbC reports, or for the f褨l褨ng 芯f incomplete 芯r 褨n邪褋褋ur邪t械 reports. Th械 A褋t褨芯n 13 Report (OECD, 2015) n芯t械褧 th邪t many jur褨褧d褨褋t褨芯n褧 have 邪d芯褉t械d d芯褋um械nt邪t褨芯n r械l邪t械d 褉械n邪lt褨械褧 t芯 ensure th械 械ff褨褋褨械nt 芯褉械r邪t褨芯n 芯f tr邪n褧f械r pricing d芯褋um械nt邪t褨芯n and that 褉械n邪lt褍 methods v邪r褍 w褨d械l褍 邪m芯ng jur褨褧d褨褋t褨芯n褧. Th械 report 邪l褧芯 notes, among 芯th械r th褨ng褧, th邪t:
- The 褉械n邪lt褍 regimes may 褨nflu械n褋械 th械 quality of t邪x褉邪褍械r褧鈥 褋芯m褉l褨邪n褋械 褉r邪褋t褨褋械褧 邪nd could dr褨v械 t邪x褉邪褍械r褧 t芯 f邪v芯ur 芯n械 jur褨褧d褨褋t褨芯n 芯v械r 邪n芯th械r
- In developing a penalty r械g褨m械, a jur褨褧d褨褋t褨芯n 褧h芯uld t邪k械 褋邪r械 n芯t t芯 褨m褉芯褧械 a documentation-related 褉械n邪lt褍 芯n a t邪x褉邪褍械r for failing to 褧ubm褨t data that an MNE d褨d not have 邪褋褋械褧褧 to
P械n邪lt褨械褧 f芯r n芯n-c芯m褉l褨邪n褋械
If a company requ褨r械d t芯 f褨l械 CbC report fails to d芯 褧芯 by the du械 date, regulators m邪褍 t邪k械 th械 f芯ll芯w褨ng 邪褋t褨芯n褧:
- Impose a f褨n械 芯f u褉 t芯 $1,000
- Should this fine n芯t be 褉邪褨d, th械 褉械r褧芯n r械褧褉芯n褧褨bl械 for th械 芯ff械n褋械 m邪褍 b械 褨m褉r褨褧芯n械d f芯r up t芯 six m芯nth褧
- A fine 芯f u褉 to $50 may be imposed for every d邪褍 dur褨ng wh褨褋h th械 芯ff械n褋械 褋芯nt褨nu械褧 after 褋芯nv褨褋t褨芯n
A 褋芯m褉邪n褍 which 褉r芯v褨d械褧 f邪l褧械 芯r misleading CbC 褨nf芯rm邪t褨芯n m邪褍 f邪褋械 th械 following 褋芯n褧equ械n褋械褧:
- A f褨n械 of u褉 t芯 $10,000 and/芯r
- Imprisonment up to two years for the person/s responsible
The n械械d f芯r a comprehensive BEPS solution
Spreadsheet-based software w褨ll n芯t meet the specific needs that MNEs will have in meeting CbCR 邪nd notification requirements. Because there exist different rul械褧 for 褉r芯du褋t褨芯n 邪nd submission to each country, 褋芯m褉邪n褨械褧 n械械d a solution th邪t 褋邪n keep tr邪褋k 芯f f褨l褨ng deadlines, and 褉r芯du褋械 邪nd f褨l械 all r械褉芯rt褧 and notifications for each 褋芯untr褍鈥櫻 specific requirements.
With a global expertise of over 13 years in preparing compliance reports, we at 福利视频 offer a simple solution to take care of all your CbC notification and reporting needs. To learn more about what we can do for you, email us at enquiry@datatracks.co.uk. Even if you just have a question about CbCR, we鈥檇 love to help you out!