This is part of the OECD’s work to ensure swift and efficient implementation of the BEPS measures, endorsed by G20 leaders as part of the final BEPS package in November 2015, sources said.
India had in the recent Budget proposed changes to the domestic tax law to stipulate CbC reporting,
“This OECD move should be seen more of a tax administration-to-tax administration sharing of information on the CbC reports filed by multinational enterprises. This standardised electronic format does not directly impinge on MNC taxpayers,” Rahul Mitra, Head of BEPS and Head of Tax Dispute Resolution, KPMG in India told BusinessLine.
Jiger Saiya, Partner – Direct Tax, BDO India, said that the CbC reporting has been termed as a new world order for tax transparency and allocation of fair share of taxes corresponding to economic activity in a jurisdiction.
“The OECD has released standardised electronic format for effective exchange of CbC reports between jurisdictions. The schema will assist tax authorities in understanding complete structure of organisation including business activities, do value chain analysis and identify gaps and transfer pricing risks. This way they can effectively deploy audit resources and conduct pointed enquiries,” Jiger said.
The G20 BEPS Project had set out 15 key actions to reform the international tax framework and ensure that profits are reported where economic activities are carried out and value created.
The BEPS Project delivers solutions for governments to close the gaps in existing international rules that allow corporate profits to “disappear” or be artificially shifted to low or no tax environments, where companies have little or no economic activity.
The OECD’s objective of mandating CbC is to ensure that all relevant tax authorities have access to the same information about an MNE group’s value chain and the resulting tax consequences.
CbC Reports, to be electronically transmitted between Competent Authorities, will assist tax administrations in obtaining a complete understanding of the way in which Multinational Enterprises (MNEs) structure their operations, by annually providing them with key information on the global allocation of income and taxes paid.
It will also cover information about which entities do business in a particular jurisdiction and the business activities each entity engages in.
The information to be included in the CbC Report will be collected by the country of residence of the Reporting Entity for the MNE group, and will then be exchanged under the relevant international exchange of information agreement.