BEPS Action 13 – Country by Country reporting
As compliance obligations on companies increase in the face of a government clamp down on tax avoidance, companies should consider whether any of the new OECD recommendations against Base Erosion Profit Shifting (“BEPS”) will affect them. The BEPS report comprises fifteen action points designed to tackle tax avoidance and is endorsed by the G20 in order ensure consistency across countries for companies who have operate across different territories.
BEPS Action 13
Country by Country reporting has been brought in under BEPS Action 13, and requires large multinational groups to prepare a return which shows financial results and how these results can be broken down across the different tax jurisdictions the company operates in. This is designed to provide the government with transparency across the different jurisdictions companies operate in and ensure that revenue is recognised in line with the operations in that country.
Companies will first need to collate information covering revenues, income tax paid, number of employees and tangible assets; this is something which your G+E tax advisor will be able to help with, or advise on the approach to take, should you require assistance. Following the data gathering exercise, information will then need to be presented in a table which will allow HMRC to compare values across the different jurisdictions. Companies should disclose whether they are the ultimate holding company or a surrogate parent entity. If the company is only a subsidiary it should notify HMRC of the identity of the parent entity, which jurisdiction the Country by Country reporting will take place and date the reporting was submitted.
The Country by Country reporting return will need to be separate to the standard UK Corporate Tax return, but similarly submitted electronically. The first returns were due 12 months after the year end for periods ending after 1 January 2016, and will continue to be due at the same time as your corporate tax return, 12 months after the year end.
If the ultimate parent company is not required to file a Country by Country report in the jurisdiction it is based in, but the group would otherwise meet the filing requirements the company is required to file a local ‘UK Country by Country’ report which would only cover the UK company and its subsidiaries and PEs.
There is a get out clause, as groups which have annual consolidated revenue of less than 750million euros are exempt from Country by Country reporting.
Whilst we anticipate that most of our clients would be covered by the exemption if you would like further information, or if you think Country by Country reporting applies to you, please get in touch.