BEPS action 13 Country-by-Country reporting and additional transfer pricing documentation

Country-by-Country reporting: extension of the notification obligation

In 2013 the OECD and G20 governments started the BEPS project (Base Erosion and Profit Shifting) with an ambitious goal. The goal was to revise the tax rules to align them to developments in world economy and ensure that profits are taxed where economic activities are. As a result, the OECD/G20 BEPS project set out 15 actions in the 2015 BEPS Report to achieve this goal.

Action 13 of this report relates to Country-by-Country ("CbC") reporting and additional transfer pricing documentation (so called Master file and local file).

CbC Reporting

Multinational companies will be required to report aggregate information on an annual basis with respect to the gobal allocation of income and taxed paid within the total group together with other indicators of the location of economic activity within the Group. The so called country report needs to be filed annually by the ultimate parent or surrogate parent entity with the tax office in their country or residence and is applicable to a multinational group with group consolidated revenues of more than EUR 750M in the year previous to the year for which the country report needs to be filed. The tax office of the country of residence will then on its turn forward the country report to other tax offices in the jurisdictions in which the multinational is active.

Within the framework of action 13 it was decided that a notification to the tax office in the various jurisdictions is required to identify the reporting entity. The notification by Dutch group entities should be done ultimately on the last day of the applicable first book year which was 31 December 2016. However, the State Secretary recently decided that the ultimate date of notification has been extended up to 1 September 2017.

Additionally, we note that the country report itself should be filed within 12 months after closing of the book year. So, for book year 2016 the filing deadline for the country report is 31 December 2017.

Additional transfer pricing documentation

Companies which are a so-called 'group entity' need to have a master file and a local file documented in its files. Multinational companies only have the obligation to have the master file and local file documented in its administration if the multinational group has a consolidated revenue of at least EUR 50M. If the total group revenue is less than EUR 50M no reporting requirements are needed.

The master file provides an overview of the group including the nature of its activities, its general transfer pricing policy and its global allocation of income and income activities. The local file provides information that is relevant for the transfer pricing analysis regarding intercompany transactions entered into by the individual group entities. The master file and local file need to be ready before the tax filing deadline of the relevant taxable year.