In this article we will share our experience and best practice when it comes to CbC reporting, and discuss some of the challenges you may face when creating the XML file according to the OECD XML schema.
At the moment you are probably considering how to meet the Country by Country reporting requirements. You may already have compiled the CbC data and made a test run. Now you need to think of how the filing of the gathered information should be managed.
Many countries have already decided that filing should be made using the OECD XML schema format. The OECD has provided a detailed guide for creating the XML schema which is necessary to follow. If your XML file is not set up properly your reporting will not meet the requirements for filing.
As responsible for CbC reporting you need to have a clear picture of what the XML reporting should contain. This to ensure that you can compile all relevant information which should be included in the XML schema. In addition, you need to be able to guide the IT specialists that support you in creating the XML file.
Collecting the required CbC data
You need to ask yourself if you have all the required information to create the XML file. In this respect, you cannot simply complete table 1-3 and from that create an XML file. There are detailed instructions in the OECD guidelines which require you to consider a number of issues before the creation can begin. We have listed a few of those below:
Creating the XML file according to the XML schema
When you have compiled all the necessary information you need to create an XML file. Most likely you will carry out this work together with an IT specialist as the creation requires knowledge about programming. At the same time the IT specialist will have no knowledge of transfer pricing which is why it is important that you take part in the creation process and sign off on the XML file. Below, we have listed some of the questions you need to consider:
It is important to file your XML schema with your tax authority well before the deadline. Should it not meet the standards you will then have time to work with your IT specialists to correct it and file again before the deadline.
Do not forget to properly document the work you have done since you will need to repeat the process next year. The documentation is also important when you receive questions from different countries regarding previously filed figures.
» Please proceed to User Guide for Tax Administrations and Taxpayers to download the documentation needed for creating the XML file according to the OECD XML Schema.
We have the solution
If you would like to know how Palantir´s solution could support you in meeting the BEPS 13 reporting requirements, please contact us for a demonstration by emailing firstname.lastname@example.org.
Tax administration has issued further clarification regarding the submission of CbC Reports. According to the note, corporations with a turnover exceeding EUR 750 million will be required to submit CbC Report for financial years commencing on or after 1 January 2016. The report will have to be submitted within 12 months from the end of a relevant fiscal year and additionally, tax authorities will have to be notified in writing at Ministry of Finance, Tax Administration, Central Office, Department for Normative Affairs and International Cooperation, Boškovićeva 5, Zagreb by 30th April 2017. Non-compliance can result in an administrative penalty ranging between EUR 267 and EUR 26 760.
Recently released guidelines on transfer pricing documentation include changes in local and master files as well as introduction of CbC Reports. Entities exceeding revenue threshold of USD 30 million will have to comply with the new standard of local and master file. Submission of financial statements of foreign related party will no longer be required, however taxpayer will have to include, inter alia, existing APAs, compliance with arm’s length or information by line of business (please note that local and master file as recommended by BEPS will not replace the existing transfer pricing documentation). The CbC Report will have to be submitted by 31 December 2017 (for financial year starting 1 January 2016).
Bahrain - Philippines
On 13 April 2017, an amending protocol to update the Bahrain - Philippines Income and Capital Tax Treaty (2001) was signed. Further developments will be reported as they occur.
Cyprus – Iran
On 5 March 2017, the Cyprus - Iran Income Tax Treaty (2015) entered into force. The treaty generally applies from 1 January 2018. When effective the maximum rates of withholding tax will be:
Local tax news
According to the press release, Estonian Parliament passed amendments to the Commercial Code which will allow to establish a company and to manage it from abroad. Under current rules both the place of management and a company must be located in Estonia. The amendments allow the place of management to be abroad, however a contact person in Estonia should be appointed (e.g. a notary, an auditor, etc.). While the Estonian legislator argues that this will help boosting the commercial activities, especially the e-trade, others argue that it might create legal entities without substance.
Tax administration published a guidance on withholding tax procedure as well as application of exemption for dividends and other forms of cross-border payments paid to non-residents. A refund can be claimed within 4 years after the end of a year when dividends where received. With effect 1 January 2017, it is presumed that dividends are received on the maturity date. However, taxpayers are also allowed to directly apply a lower treaty rate (or exemption if applicable) provided that they present a certificate of exemption issued by tax authorities in the recipient’s jurisdiction (the duration of a certificate is 3 years).
Country-by-Country reporting requirements - NEW!
The last year's addition of the Comtax BEPS-Tracker was for many a well-received feature in Comtax. Over recent months we have received requests to add more specific information concerning country-by-country (CbC) deadlines and associated information as this reporting is becoming evident for many.
We are happy to announce that we have now added information for more than 50 countries regarding:
This information will be displayed under the new Commentary chapter BEPS. Go to Database / Commentary / Action 13 - CbC Report and make your choice of country. You will still be able to use the Comtax BEPS-Tracker to navigate this action point!
The added information on the CbC reporting requirements goes hand-in-hand with our BEPS 13 reporting module for automatic production of the standard OECD XML reporting format, comprehensive analytic tool and effective management of BEPS 13 and transfer pricing data and documents.
If you like to know more or if you have any suggestions for improvements on how we can improve your Comtax experience please do not hesitate to contact us at email@example.com.