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OECD announces changes to CBCR guidelines

At a recent conference in Paris, the OECD’s Joe Andrus, director of transfer pricing, discussed the results of Working Party 6 deliberations and announced the alterations that will be made to country-by-country reporting (CbCR) guidelines as a result of feedback from the tax industry.

The OECD issued a revised draft of chapter V of the OECD guidelines on documentation in January. Guidance on country-by-country reporting (CBCR) was one of the vital additions aimed at helping tax authorities with risk assessment. However, reactions from the tax industry showed that, CBCR in its current state, was not considered feasible.

The main criticisms included:

· extra time and cost;

· omission of materiality thresholds;

· no differentiation in thresholds for MNE’s and SME’s; and

· failure to simplify process for taxpayer, only the tax authority.

The criticisms were numerous and widespread. Feedback, which the OECD requested on January 30 2014, reflected an overarching consensus that the guidelines were impractical. It appears that the tax market’s response heavily influenced the recent alterations.

The results of WP6 deliberations are as follows:

• concluded CBCR only requires aggregate countrywide reporting, not entity by entity;

• required financial data: revenue, earnings before taxes, cash tax, current tax accrual, FTEs and tangible assets;

• CBCR will not be part of the master file;

• last six columns have been omitted (Interest, royalties, etcetra);

• transactional reporting only in local file;

• 2nd page of CBCR: number of entities and business codes;

• build from either stats or financial reporting so long as applied consistently across the group;

• make clear in plain language that this is high level reporting; and

• 25 highest paid employees removed from the master file.

The changes reflect the OECD’s desire to cooperate with taxpayers and tax authorities to reach a CBCR template which is feasible and suits the needs of the tax industry.

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