What Is Country-by-Country Reporting?
Country-by-Country Reporting requires multinationals to disclose financial data for each jurisdiction they operate in. Learn the requirements.
Key Takeaways
- Country-by-Country Reporting requires multinational groups to file a report showing revenue, profit, tax paid, and employees for each jurisdiction.
- It was introduced under OECD BEPS Action 13 and applies to groups with consolidated revenue above EUR 750 million.
- The report helps tax authorities identify profit-shifting risks and allocate audit resources more effectively.
What CbCR requires
A Country-by-Country Report discloses, for each country where a multinational operates: revenue from related and unrelated parties, profit or loss before tax, income tax paid and accrued, stated capital, accumulated earnings, number of employees, and tangible assets. This gives tax authorities a high-level view of where the group earns profits, pays taxes, and employs people, revealing potential misalignments.
Who must file
CbCR applies to multinational groups with consolidated annual revenue of EUR 750 million or more. The report is filed by the ultimate parent entity in its home jurisdiction and shared with other countries through information exchange agreements. Some countries, including Nigeria, have adopted lower thresholds. Even groups below the threshold should understand CbCR as it signals the direction of global tax transparency.
How tax authorities use the data
Tax authorities use CbCR data for risk assessment, not direct tax adjustments. A report showing large profits in a low-tax jurisdiction with few employees and minimal assets raises red flags. Authorities then conduct detailed transfer pricing audits on flagged entities. CbCR has significantly increased the ability of African tax authorities to identify profit-shifting risks involving their jurisdictions.
Compliance and filing requirements
The CbCR is typically filed within 12 months of the financial year-end. It is exchanged between jurisdictions through bilateral or multilateral agreements. Companies must also prepare a master file and local file as part of the three-tiered transfer pricing documentation framework. Failure to file can result in penalties, and some jurisdictions share non-compliance information with other tax authorities.