News and Insights

Transfer Pricing Update on BEPS Action Point 13 Country-by-Country Reporting

Tax Development Apr 06, 2015

In 2013, the Organisation for Economic Co-operation and Development (OECD) and the G20 adopted a 13-point action plan to address base erosion and profit shifting (BEPS). This action plan aims to ensure that profits are taxed where economic activities generating the profits are performed and where value is created. In September 2014, Action 13 regarding country-by-country (CbC) reporting was delivered. Following the September 2014 deliverable, the OECD published guidance on the implementation of transfer pricing documentation and CbC reporting in February 2015.

Guidance on Transfer Pricing Documentation and Country-by-Country Reporting
In September 2014, the OECD released the report regarding Action 13. This document contains revised standards for transfer pricing documentation and a template for CbC reporting. In order to ensure that profits are taxed where value creation related to the profits are realized, the OECD adopted a three-tier approach. This approach requires multinational enterprises (MNE) to keep a master file containing information relevant for all MNE group members, a local file referring specifically to material transactions of the local taxpayer, and a country-by-country report containing information relating to the global allocation of the MNE group income and taxes paid together with certain parameters of each entity within the MNE group. 

Master File
The master file should give an overview of the MNE group and contain information that can be grouped into five categories:

  • Group organized structure
  • Description of MNE business
  • MNE group financial transactions
  • MNE group intangibles
  • MNE group financial and tax positions

In general, the master file should contain necessary information that enables readers to place the MNE group transfer pricing practices in their global economic, legal, finance, and tax context. When preparing the master file, the MNE should keep in mind that information is considered important if its omission would affect the reliability of the transfer pricing outcomes.

Local File
As opposed to the master file, the local file should contain more detailed information relating to specific intercompany transactions. The local file supplements the master file and helps to ensure the taxpayer has complied with the arm’s length principle in its material transfer pricing positions. The local file focuses on intercompany transactions involving different jurisdictions.

Country-by-Country Report
The CbC report requires total tax jurisdiction-wide information relating to the allocation of income, taxes paid, and certain indicators of the location of economic activity among tax jurisdictions in which the MNE group operates. The CbC report must also contain a list of all the constituent entities for which financial information is reported. The parent of the MNE group is required to complete the CbC template and disclose the allocation of the group’s income taxes and business activities.

Guidance on the Implementation of Transfer Pricing Documentation and Country-by-Country Reporting 
In February 2015, the OECD published guidance on the implementation regarding BEPS Action 13. The February 2015 report includes the following guidance:

  • The report recommends that the first CbC reports are filed for fiscal years beginning on or after January 1, 2016.
  • The report recommends that MNEs with consolidated revenue of less than 750 million EUR are exempt from CbC reporting. This should be the only exemption for CbC reporting.
  • The report endorses the importance of confidentiality, consistency, and appropriate use by governments.
  • The report recommends that jurisdictions request CbC reporting from parent companies of MNE groups resident in their jurisdiction and exchange this information on an automatic basis with the jurisdictions in which the MNE group operates.

Necessary Steps
Based on the above, it is recommended to evaluate the consequences of CbC reporting. If you need any help or more information regarding the upcoming CbC reporting, Ryan International Transfer Pricing professionals are available to provide you with more details and how it may affect your organization.


Roderick Veldhuizen
+31 (0) 20 570 3520