Multilateral Competent Authority Agreement on automatic exchange of CbC reports
First published in Global Tax Weekly, 16 March 2017
Development and global implementation of the Base Erosion and Profits Shifting (BEPS) Action Plan, prepared by the Organisation for Economic Co-operation and Development (OECD), have successfully continued in 2016. The country-by-country (CbC) reporting initiative, under Action 13 of the BEPS project, has not been an exception.
As of 10 March 2017, 57 jurisdictions have already signed the Multilateral Competent Authority Agreement (MCAA) on the automatic exchange of CbC reports.
What does CbC reporting and the automatic exchange of CbC reports entail?
The ultimate parent entity of any large multinational enterprise (MNE) (with annual consolidated group revenue in the immediately preceding fiscal year equal to or exceeding EUR750m, or a near equivalent amount in domestic currency), for the MNE group's fiscal year beginning on or after 1 January 2016, will have to prepare and file a CbC report in the jurisdiction of its tax residence. Then, following the government-to-government mechanism implemented, CbC reports will be exchanged on an automatic basis with the competent authorities of the jurisdictions in which the MNE group operates.
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It is worth reiterating that the exchange will not start with the jurisdictions which are not party to the CbC MCAA. For instance, if one entity from the group of the MNE is a tax resident of the Russian Federation, a CbC report will not be sent to the Russian tax authorities until the Russian Federation joins the agreement.