As part of continuing efforts to boost transparency by multinational enterprises (MNEs), 31 countries[1] signed today the Multilateral Competent Authority Agreement (MCAA) for the automatic exchange of Country-by-Country reports. The signing ceremony marks an important milestone towards implementation of the OECD/G20 BEPS Project and a significant increase in cross-border cooperation on tax matters.
The MCAA will enable consistent and swift implementation of new transfer pricing reporting standards developed under Action 13 of the BEPS Action Plan.
It will ensure that tax administrations obtain a complete understanding of the way MNEs structure their operations, while also ensuring that the confidentiality of such information is safeguarded.
"Country-by-Country Reporting will have an immediate impact in boosting international co-operation on tax issues, by enhancing the transparency of multinational enterprises' operations," said OECD Secretary-General Angel Gurría. "Under this multilateral agreement, information will be exchanged between tax administrations, giving them a single, global picture on the key indicators of multinational businesses. This is a much-needed tool towards the goal of ensuring that companies pay their fair share of tax, and would not have been possible without the BEPS Project." (read the speech)
The OECD/G20 BEPS Project set out 15 key actions to reform the international tax framework and ensure that profits are reported where economic activities are carried out and value created. BEPS is of major significance for developing countries due to their heavy reliance on corporate income tax, particularly from MNEs.
G20 Leaders endorsed a wide-ranging BEPS package in November 2015 that marks an historic opportunity for improving the effectiveness of the international tax system. The package was the result of more than two years of discussion involving all OECD and G20 countries, as well as more than a dozen developing countries. Following endorsement of the BEPS measures, the focus has shifted to designing and putting in place an inclusive framework for monitoring BEPS and supporting implementation of the measures, with all interested countries and jurisdictions invited to participate on an equal footing.
With Country-by-Country reporting tax administrations where a company operates will get aggregate information annually, starting with 2016 accounts, relating to the global allocation of income and taxes paid, together with other indicators of the location of economic activity within the MNE group. It will also cover information about which entities do business in a particular jurisdiction and the business activities each entity engages in. The information will be collected by the country of residence of the MNE group, and will then be exchanged through exchange of information supported by such agreements as signed today. First exchanges will start in 2017-2018 on 2016 information. In case information fails to be exchanged, the Action 13 report on transfer pricing documentation provides for alternative filing so that the playing field is levelled.
[1] Australia, Austria, Belgium, Chile, Costa Rica, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Japan, Liechtenstein, Luxembourg, Malaysia, Mexico, Netherlands, Nigeria, Norway, Poland, Portugal, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Switzerland and United Kingdom.
Bron: OECD
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