Prepare your CbCR in the correct format with ease
CbCR or Country by Country Reporting is one of the cornerstones of OECD’s action plans relating to Base Erosion & Profit Shifting (BEPS). This regulation mandates an increased sharing of information between tax authorities and different countries to reduce pressure on the UK government for its sovereign debt. If the recent two years are any indication, tax laws and treaties are going through sweeping changes owing to the uncertainty.
One such is the proposed mandate to implement public country-by-country reporting across the EU by early 2023. This mandate is likely to take effect in the first financial year starting on or after early 2024. According to this proposed directive, essentially, certain large multinational enterprises operating in more than one country in the EU would need to disclose their country-by-country tax information publicly. This has triggered a widespread need to re-think tax and compliance reporting processes for businesses with worldwide operations.
It is also believed that EU countries lose close to 50 million euros of revenue each year due to tax avoidance measures and aggressive tax planning by big multinational companies. The European Council and European Parliament believe that an obligation for big multinational companies to report their profits and pay their Tax in the EU, segmented by country, will help bridge that gap.
Who has to report?
Groups and private undertakings whose revenues exceed EUR 750m for two consecutive years come within the scope of the reporting obligation. However, if they don’t operate in more than one country, they need not report.
What is to be reported?
- Details of the parent (or standalone) undertaking
- If applicable, details of subsidiaries that are consolidated in the parent’s financial statement
- The number of employees on a full-time basis
- Revenue Figures
- Profit or loss before Tax
- Income tax accrued and the amount of cash tax paid
- Consolidated earnings at the end of the relevant financial year
How and when to report?
The European Commission is preparing to release a standard template and a mandate to follow a machine-readable electronic reporting format such as XBRL. Reports have to be published on the parent (or standalone) undertaking’s website, or, where the reporting obligation is passed on, the relevant subsidiary’s website, within 12 months of the balance sheet date for the reporting year. Deferrals would be available for disclosure of certain information for a maximum of five years.
For this directive to be adopted as the legislature, the current provisionally agreed mandates are to be endorsed by relevant bodies. Once the endorsement is done, the European Council must confirm its position on the agreed text, following which the European Parliament must approve to complete the process. EU member states have 18 months for implementing this directive into national law.
Preparing and filing a CbCR can be complicated. These new rules that are being introduced don’t make it any easier, either. If you are spending too much time and resources in putting together a CbCR report, you may want to consider taking some help.
We at DataTracks, have tax and compliance specialists who dedicate their time and are experts in handling regulatory reporting. Want to start a discussion on how we can assist? Get in touch with us at firstname.lastname@example.org