The OECD has released the consultation document for its review of Country-by-Country Reporting which forms part of the standardised approach to transfer pricing documentation established under Action 13 of the BEPS Project (see press release). The review reopens points from the original consultation in 2014 and indicates that the scope of CbC Reporting may be broadened - in particular, the suggestion that the revenue threshold could be lowered may give pause for thought, given that it is a key anchor point for the application of digital services taxes and the OECD's Pillar 1 measures.

Comments should be submitted no later than Friday, 6 March 2020, 18:00 (CET); a public consultation meeting will be held at the OECD Conference Centre in Paris on Tuesday, 17 March 2020.

Extending the scope

CbC reporting currently applies to MNE groups. Should it also apply to single enterprises with one or more foreign permanent establishment? This change would have the benefit of treating all large enterprises the same, regardless of their corporate structure.

The consultation document also asks whether CbC Reporting should, in certain circumstances, apply to groups or enterprises whose revenues, if taken together with those of one or more other group(s) or enterprise(s) controlled by the same individual (or individuals acting together), would exceed the revenue threshold.

Revenue threshold

The BEPS Action 13 report provides an exemption from CbC Reporting for MNE groups with annual consolidated group revenue in the immediately preceding fiscal year of less than EUR 750 million (or the local currency equivalent).

Despite this exemption, 90% of total corporate revenues are within the scope of CbC Reporting. Consequently, any decrease in the threshold would be unlikely to result in a significant increase in the proportion of total corporate revenues covered. So, whilst asking what benefits and practical challenges would result from lowering the threshold, the consultation document notes that it may be prudent to retain the threshold at its current level during the implementation and evaluation of other suggested changes that may be made following the consultation. This approach would seem sensible given the number of other measures using the same threshold - individual countries' digital services taxes and the OECD's Pillar 1 proposal - that entail a significant additional compliance burden for affected companies.

Whether a periodical review of the translation of the threshold into local currencies should be mandated is, nonetheless, a pertinent question. Other questions concern the type of revenue to be taken into account and the reference period. For the purposes of the consultation document, it is suggested that extraordinary income and gains from investment activities should be taken into account. The concern that a consequent revenue spike in one financial year would bring groups within the scope of CbC Reporting whose revenues would not normally be above the threshold could be addressed by the implementation of another suggestion - to extend the reference period beyond one fiscal year.

Points revisited

Following comments during the 2014 consultation, it was decided that CbC Reports should present aggregate (rather than consolidated) data by tax jurisdiction (rather than entity by entity). The OECD now invites comments on the benefits and practical challenges of reversing these decisions. The consultation document itself notes that switching data capture and reporting systems from aggregate to consolidated data would be challenging. MNEs may wish to comment on the amount of cost and work that this would involve.

The granularity of the information required to be reported is also revisited. Should data on related party interest, royalty and service fee income and expenses be reported separately? Should the report include information on R&D expenditure and deferred tax? Comments are invited on the practical challenges of requiring this additional data.