What is Country-by-Country Reporting (CbCR)?
More and more countries are requiring multinational enterprises (MNEs) to comply with the new model of tax reporting and compliance. MNEs are subject to multiple tax jurisdictions. Country-by-Country reporting requires all types of large multinational enterprises and partnerships based in the UK to provide an annual report with a country-specific breakdown of profits made and taxes paid in all countries in which they operate. Simply operating at a global level should not exclude MNCs from having to declare their returns of all their firms on foreign operations.
Who should file the report?
In the UK, the threshold for filing of the country by country (CbC) report by MNE groups is set at an annual consolidated group turnover of €750 million or more during the preceding accounting period. This is in line with the Organization for Economic Co-operation and Development (OECD) guidance on the implementation of CbC.
CbC Reporting XML schema
CbC report must be created in XML (extensible markup language) file following the OECD schema and HMRC/Revenue rules. XML is a commonly used data structure for electronically storing and transferring information across different systems.
Once the notification to HMRC has been made, a registration form will need to be completed.
CbC reporting notification requirement for MNE groups is applicable to accounting periods beginning on or after 1 January 2016 and companies cannot exceed 12 months from the end of the relevant accounting period to file a report with HMRC/Revenue.
HMRC’s Notification Requirements for CbC Reporting
HMRC’s notification requirements vary significantly depending on the tax residence of its parent company, the circumstances of the multinational enterprise (MNE) group to report annually, and the entry of tax information sharing agreement between the UK and other countries.
The UPE is a tax resident
UK entities in MNE groups within the scope of CbCR should notify HMRC annually which entity in the MNE group will file the CbCR and where. The notification must be made for the reporting period ending on, or if later 1 September 2017.
The UPE is a tax resident outside the UK
In some circumstances, the ultimate parent’s home country doesn’t have CbC requirements for the filing of a country-by-country report or there is no arrangement to exchange CbC reports with the UK.
CbC reports will be shared by HMRC with tax authorities in those countries named in the report and with which the UK can enter into competent authority agreements for the international exchange of information. The new data sharing rules enable HMRC to receive information from foreign countries operating in the UK.
Tax Administration is going digital: Here’s how to submit CbC reports
Doing your taxes is a necessary paperwork, sometimes hurts the multinational companies. CbC reporting is a challenging and complex issue for the multinational enterprises. But the best cloud-based application makes submission of CbC Reporting for MNE groups hassle-free. DataTracks provides CbC Reporting Cloud Application that helps multinational enterprises to meet their Country-by-Country Reporting requirements. Simply fill in the data in an Excel workbook and share with us. DataTracks will generate the CbC Report in XML format, and validate the XML file before acceptance, follow the OECD guidelines & HMRC/Revenue rules, and submit the validated XML file to HMRC/ Revenue successfully.