Tax & Accounting Blog

Germany Initiates Consultation on OECD CbCR Exchange Multilateral Agreement

BEPS, Blog, Checkpoint, ONESOURCE, Transfer Pricing May 6, 2016

On April 12, 2016, Germany’s Federal Ministry of Finance issued a draft law that would implement the OECD Multilateral Competent Authority Agreement on the Exchange of Country-by-Country (CbC) Reports (“MCAA”) that the government signed on to with 30 other countries on January 27, 2016. The MCAA describes the type of information to be exchanged between Germany and other countries with respect to the activities of certain multinational enterprises (MNEs). It does not appear that the law has been submitted yet to the German Parliament for consideration.

At present, there is no requirement to prepare annual transfer pricing reports in Germany, except for extraordinary transactions. Extraordinary transactions are those that have a substantial impact on a German taxpayer’s income (e.g., reorganizations). Documentation for extraordinary transactions must be prepared within six months after the end of the fiscal year when the transactions took place.

The draft law and corresponding press release do not address implementation of country-by-country reporting (CbCR) in Germany’s domestic tax rules, but Germany previously announced that it intends to adopt the OECD BEPS Action 13 recommendations, without any changes to the OECD CbCR template  in Annex III of the BEPS Action 13 recommendations.

In fact, on February 26, 2016, the German Federal Council (Bundesrat) issued a decision (No. 47/16) that it intends to introduce several BEPS-related measures in 2016, including CbCR. The Bundesrat accordingly called on the German government to issue draft legislation that would impose reasonable and achievable business transfer pricing reporting requirements, including to ensure that trade secrets remain confidential.


The draft law says that Germany intends to maintain any CbCR information that it receives from taxpayers as confidential. This aligns with statements on February 18, 2016, by the Ministry of Finance Deputy Director of International Tax (Martin Kreienbaum) during an international tax conference in Berlin that Germany is opposed to publication of CbC report information and beneficial owner registries.

However, taxpayers should know that a proposal made by the European Commission (EC) on April 12, 2016 seeks to amend the Accounting Directive (Directive 2013/34/EU) to ensure that large groups publish annually on their websites a report disclosing the profit and the tax accrued and paid in each member state on a CbC basis. This information would remain available for five years. Any multinational company (including banks)–European or not–that is currently active in the EU’s single market with a permanent presence in the EU, and that has a turnover equal to or exceeding €750 million, would have to comply with these additional transparency requirements.

Background on CbCR

In 2015, the OECD recommended a new three-tiered standardized approach to transfer pricing documentation under Action 13 of the BEPS project. The G20 leaders formally endorsed this approach in the same year.

Referred to as a “minimum standard,” the recommended approach would require MNEs with annual consolidated group revenue equal to or exceeding €750 million to prepare and submit an annual CbC report to:

  • Report the number of employees, stated capital, retained earnings, and tangible assets in each jurisdiction where business is conducted;
  • Identify each entity within the group doing business in a particular jurisdiction; and
  • Provide details of the business activities of each entity.

The OECD recommended that the annual CbC reports be filed in the jurisdiction of the tax residence of the ultimate parent entity and shared between jurisdictions through the automatic exchange of information on a government-to-government basis under one of the following tax agreements:

On August 28, 2015, Germany deposited its instrument of ratification of protocol to the OECD Convention, which entered into force on December 1, 2015. The OECD Convention applies from January 1, 2016, in Germany.

The Convention mentioned above, jointly developed by the OECD and the Council of Europe in 1988 and amended by a Protocol in 2010, is the most comprehensive multilateral instrument for addressing tax cooperation between jurisdictions, according to the OECD.

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