Different approaches on implementing CBCR taken by different jurisdictions

Fri 23 Feb 2018

The OECD has released a report comparing different approaches taken by jurisdictions to implementing country by country reporting (CBCR).  These differences arise because the OECD guidance provides the flexibility for jurisdictions to take different approaches.  In particular, flexibility is provided over:

• Whether extraordinary income and gains from investment activities are required to be included in total consolidated group revenues when applying the EUR 750 million threshold;
• How to apply the EUR 750 million threshold in cases where the previous fiscal period is less than 12 months; and
• Whether a CBCR must be prepared by the ultimate parent entity of an MNE group for the first fiscal period in which the group has independent existence, following disposal by another group.

This may be of interest to businesses within CBCR for explaining to interested parties the reasons for differences in application of the CBCR rules in different jurisdictions.

For example, with respect to gains from investment activities recognised in consolidated financial statements:

• Countries which require the inclusion of these gains in consolidated turnover for CBCR include: Belgium, Luxembourg, Portugal and the US;
• Countries that exclude these gains from consolidated turnover (unless included as revenue under GAAP) include: Netherlands and the UK.

Another difference concerns the sale of a subgroup of an MNE:

• Included amongst those countries that would require the subgroup to file a CBCR in its first accounting period (assuming it met the turnover threshold) are Luxembourg and the US [they consider the subgroup was a member of an MNE in the previous period];
• Included amongst those countries that do not consider the subgroup to have been part of an MNE group prior to their disposal – when considering whether the subgroup is within CBCR for its first period – are: Netherlands, Ireland, Portugal and the UK.

For a further discussion of the application of the CBCR rules, please get in touch with a member of the Mazars International Tax team.