Tax and Legal Newsletter

Transcription

1 16 June 2016 Newsletter Tax and Legal Newsletter EY CbCR.WEB The new tool for effective and timely management of Countryby-Country Reporting ices/tax/tax- Performance-Advisory Contacts at EY Igor Chufarov +380 (44) Oleksandr Fedosieienko +380 (44) a.ey.com EU Directive on Country-by-country reporting Executive summary On 25 May 2016, the Economic and Financial Affairs Council of the European Union (ECOFIN) which is made up of the Finance Ministers of all European Union (EU) Member States unanimously voted in favor of the amendments to the EU directive on exchange of information (the Directive). The revision, that will implement the recommendations of Organization s for Economic Cooperation and Development Base Erosion and Profit Shifting Action 13 on country-by-country reporting, is one of the elements of the European Commission s Anti-Tax Avoidance package from January According to the ECOFIN, the principal aim of the directive is to prevent multinationals from exploiting the technicalities of the tax system, or mismatches between different tax systems, in order to reduce of avoid their tax liabilities. The Directive requires multinationals to report information on revenues, profits, taxes paid and accrued, capital, earnings, tangible assets and the number of employees on a country-by-country basis. This information must be reported for fiscal years starting on or after 1 January 2016, to the tax authorities of the Member State where the group s ultimate parent entity (UPE) is tax resident. If the UPE is not resident in the EU, the report would have to be filed through a surrogate parent (EU or non-eu based) or the EU based subsidiaries. CbC reports would be filed within 12 months from the end of the fiscal year to which they relate.

2 Tax and Legal Newsletter 2 Detailed discussion Reporting obligation EU and non-eu multinational groups with operations in EU Member States and consolidated group revenue of at least 750 million (qualifying groups) would be required to file CbC reports for financial years starting on or after 1 January As a general rule, the reporting entity would be the UPE of a qualifying group (primary reporting). The report would be delivered to EU Member States directly, if the UPE is resident in the EU or if it is not, through exchange of information. Secondary reporting obligation In cases where the UPE is not required to file a CbC report in its jurisdiction of tax residence or the report is filed but not shared with an EU Member State under exchange of information, a secondary mechanism will be applied which could include either: local filing by local constituent entities with the local tax authorities; the election of a surrogate entity to take the parent s place in filing the CbC reports. Once the proper notifications are in place, the surrogate entity s tax authority would provide the report to participating CbC jurisdictions where the group has operations and with whom competent authority agreements are in place. Timing of filing and exchange of the CbC reports In compliance with the OECD guidance, CbC reports would be filed within 12 months from the end of the fiscal year to which they relate. Each Member State would be obliged to exchange the CbC report received with any other Member State where the group has a subsidiary or a permanent establishment. The CbC report obtained under the Directive would only be exchanged with the tax authorities of the relevant Member States and would not be made publically available 1. The exchange must take place within 15 months after the last day of the MNC group s fiscal year to which the CbC report relates, except for the reports relating to fiscal years starting on or after 1 January 2016 where the term would be 18 months after the end of the fiscal year. The Directive will require EU Member States to implement a country-by-country reporting obligation in their national legislation in line with the requirements of the Directive within 12 months from the date of its entry into force. CbC report requirements The CbC report shall contain the following information regarding an MNC group: Aggregate information relating to the amount of revenue, profit (loss) before income tax, income tax paid and accrued, number of employees, stated capital, accumulated earnings and tangible assets other than cash or cash equivalents in each jurisdiction in which the group operates Identification of each constituent entity within the group, including the entity s jurisdiction of tax residence (and the jurisdiction under which the entity is organized, if different from its jurisdiction of tax residence), and the nature of the entity s main business activity or activities. Effective date CbC reporting is effective for fiscal years beginning on or after 1 January 2016, with first CbC reports to be filed, at most, one year from fiscal year-end (i.e. 31 December 2017 for Groups with fiscal year ending 31 December 2016). 1 A separate proposal for public disclosure of certain information on a country-by-country basis for multinational groups with revenue of at least 750 Million has been published by the European Commission in April 2016 for discussion

3 Tax and Legal Newsletter 3 If the UPE is not resident in the EU, the report would have to be filed through a surrogate parent (EU or non-eu based) or the EU based subsidiaries. The Directive would give Member States the option to either require secondary filing for fiscal years starting on or after 1 January 2016 or to defer that obligation to financial years starting on or after 1 January Implications Groups should focus on the necessary steps to ensure their ability to produce the required information, including preparing procedures for gathering the information and developing internal processes and responsibilities with regard to the new reporting. With this new Directive indicating that the first required CbC Report is to cover the 2016 fiscal year, it is important that liable Groups evaluate as soon as possible their readiness to comply. *** We will continue monitoring developments and will inform you of further changes in tax legislation

4 Tax and Legal Newsletter 4 EY CbCR.WEB The new tool for effective and timely management of Country-by-Country Reporting EY have developed a comprehensive tool that can help you streamline your internal processes and generate reporting packages that could support you in satisfying the country-by-country reporting requirements under BEPS Action 13 and the EU Directive. Multinational Corporation CbCR.WEB CbC Report Is an integrated IT platform for generating country-by-country reports. It allows you streamline your reporting preparation process, distribute functions among your group's entities and meet your deadlines efficiently Is standardized and well established "off the shell" solution that is easily adjustable to any of your reporting needs. It can easily be integrated into your IT environment for flexible reporting data export, transfer and upload Is globally accessible, as it is a web-based solution, and data of group companies all over the world can be entered locally or centrally Has internal guidance and support for users regarding CbCR specific requirements Provides functionalities to set up workflows to collect the CbCR relevant data and provides monitoring functionalities to ensure compliance Depending on changes in regulations EY will provide updates Contains out of the box features (besides CbCR) a variety of tax relevant functions. Live demonstration is available on demand Igor Chufarov Partner +380 (44) Igor.Chufarov@ua.ey.com Oleksandr Fedosieienko Manager +380 (44) Oleksandr.Fedosieienko@ua.ey.com

5 Tax and Legal Newsletter 5 EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY works together with companies across the CIS and assists them in realizing their business goals. 4,500 professionals work at 20 CIS offices (in Moscow, St. Petersburg, Novosibirsk, Ekaterinburg, Kazan, Krasnodar, Togliatti, Vladivostok, Yuzhno-Sakhalinsk, Rostov-on-Don, Almaty, Astana, Atyrau, Bishkek, Baku, Kyiv, Tashkent, Tbilisi, Yerevan, and Minsk). EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice Ernst & Young LLC All Rights Reserved. Contacts Kyiv +380 (44)