On December 21, 2016, the Finnish Tax Administration (VERO) issued Draft Guidance A240/200/2016 on country-by-country (CbC) reporting requirements ("Guidance"), the provisions of which entered into force on January 1, 2017. The Guidance provides information on CbC reporting requirements and deadlines, and is aligned with the OECD BEPS Action 13 final report. The first CbC report will include information for fiscal years beginning on January 1, 2016. On December 29, 2016, Finland published Law No. 1489-2016, which provides additional details on required transfer pricing documentation, as well as on the automatic exchange of CbC reports and tax rulings.
The group’s ultimate parent company, which is taxable in Finland, is required to provide the Tax Administration an annual CbC report if the group includes at least one foreign entity and has consolidated net sales of at least €750 million in the prior fiscal year.
A taxpayer, other than the ultimate parent, shall provide the report where any of the following apply with respect to the parent’s foreign jurisdiction:
- Does not require CbC reports.
- Has an international agreement with Finland, but there is no information exchange agreement with respect to the CbC report.
- A suspension of the automatic exchange of information has occurred.
In addition to submission of the CbC report, the company must also provide the Tax Administration with a notification with respect to the report. The deadline for the notification will depend on the group’s fiscal year. See the Tax Administration’s fact sheet published on January 2, 2017.
The CbC report must be submitted within 12 months after the group’s fiscal year end. It must include the following country-specific information on the group or parties they belong to:
- Profit or loss before tax.
- Income taxes paid and accrued and withholding taxes.
- Book value of shareholders' equity.
- Retained earnings.
- Number of full-time employees.
- Tangible fixed assets other than cash or cash equivalents.
On January 27, 2016, Finland was among 31 countries that signed the OECD Multilateral Competent Authority Agreement for the automatic exchange of CbC reports ("CbC MCAA"). Under the CbC MCAA, signatories may exchange CbC reports with other signatories if they have CbC reporting requirements in place and are a party to the OECD Convention on Mutual Administrative Assistance in Tax Matters.
Among other things, the CbC MCAA provides that CbC report information will be used to assess high-level transfer pricing and other BEPS-related risks, but not as a substitute for a detailed transfer pricing analysis of individual transactions and prices based on a full functional analysis and full comparability analysis. The information may be used as a basis for further inquiring into the multinational's transfer pricing arrangements in the course of a tax audit. If an adjustment resulting from further inquiries based on the CbC report leads to undesirable economic outcomes, the tax authorities of the jurisdictions of residence of the affected entities must consult each other in attempting to resolve the case.