Country-by-Country reporting norms for MNEs will make the financial system more transparent and resilient
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 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 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.
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 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 multinational enterprises. But the best cloud-based application makes submission of CbC Reporting for MNE groups hassle-free. DataTracks help MNE meet their Country-by-Country Reporting requirement by providing both CbC Reporting Cloud Application and as a service. Simply fill in the data in an Excel template shared by us. DataTracks will generate the CbC Report in XML format, and validate the XML file. Follow the OECD guidelines and HMRC rules, and you can submit the validated XML file to the regulator successfully.
DataTracks is an HMRC recognized iXBRL managed tagging service provider with 14+ years’ Global Regulatory Reporting Expertise. Our services also include CT 600 filing, MTD for VAT, CbCR, and Eurofiling. We have been pioneers in the XBRL accounting and financial reporting especially in the UK and Ireland market and have been delivering error-free services to our clients at a very competitive cost and quick TAT. We’re working with 7 of the top 10 Accounting firms and every client works with a Dedicated Account Manager who provides undivided attention and support until file delivery.