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OECD Reviews Latest Developments on Realization of Tax Information Exchange in over 100 Jurisdictions
On October 18, the OECD published the document “Country-by-Country Reporting – Compilation of 2021 Peer Review Reports”. This report presents the current state of play in the sphere of implementation of the Action 13 Minimum Standard of the OECD/G20 BEPS Project of the BEPS Inclusive Framework.
Action 13 calls for jurisdictions to contribute to tax transparency by requesting the largest multinational enterprise (MNE) groups to provide information on the allocation of their income, taxes paid by them and location of economic activity. Such step will significantly facilitate risk assessment challenges met by tax authorities.
Previous reviews of the Action 13 Minimum Standard in 2017, 2018, 2019 and 2020 covered three key areas: domestic legal and administrative framework, exchange of information framework, and confidentiality and appropriate use of Country-by-Country (CbC) reports. This recent 2021 version reflects the outcome of the fourth review which considered all aspects of implementation in a single publication.
132 members of the OECD/G20 Inclusive Framework on BEPS, which provided information about their implementation of CbC Reporting and/or worked on the development of corresponding national legislation, were reviewed. For each jurisdiction included, there is data on domestic legal and administrative measures taken and agreements concluded to ensure safe and confidential tax information exchange, as well as recommendations on further improvement in this matter.
Key Findings of the Report
- Over 100 jurisdictions have developed a national legal framework for CbC reporting. Some of them have formulated conclusive legislation, which was approved and currently awaits publication. 33 jurisdictions have received a general recommendation to introduce or finalize their legal or administrative provisions on CbC reporting.
- 89 jurisdictions have undergone an assessment of tax reporting confidentiality by the Global Forum on Transparency and Exchange of Information for Tax Purposes (the Global Forum) and did not receive any action plan to improve it. 10 jurisdictions are currently working on the action plan implementation.
- 84 jurisdictions have provided detailed information, which allows the Inclusive Framework to obtain a sufficient picture of the degree of the standard’s implementation in these jurisdictions.
Several members are not included in the report because they joined the Inclusive Framework after 1 December 2020 (when it was too late to incorporate them into the current peer review report) or expressed the desire to be withdrawn from the peer review process. These are Albania, Belarus, Burkina Faso, Cook Islands, Montenegro, Saint Kitts and Nevis, Samoa and Togo. The Inclusive Framework expects the withdrawn jurisdictions to provide further evidence they are able to implement the Action 13 standard.
Overview of a CbC Reporting Process and Recommendations for Ukraine
In general, Ukraine is following the BEPS Action 13 standard, but has been recommended to include the following details into the domestic legal and administrative frameworks:
- First reporting fiscal year: ending on or after 1 January 2021
- Consolidated MNE group’s revenue threshold: EUR 750 million
- Filing deadline: 12 months following the end of the reporting fiscal year
- Local filing corresponding to the Action 13 standard provisions
- Permission for surrogate parent entity filing
- First review of the domestic legal framework: in 2020/2021
Since the peer review of 2017/2018, Ukraine has not formulated a clear procedure to ensure the appropriate use of CbC reports, so it is recommended to elaborate it in detail before the country commences the process of tax information exchange. It is also recommended to conclude agreements with jurisdictions of the Inclusive Framework which have met CbC reporting requirements and with which Ukraine has an international exchange of tax information agreement in effect.