On August 23, 2018, the Czech Ministry of Finance (Ministerstvo Financi) (MOF) published an updated list of countries with which it will exchange automatically country-by-country (CbC) reports, pursuant to Section 13zb(2) of the Law on Int’l Co-operation in Tax Administration (Act No. 164/2013).
Editor’s Note: While the Czech guidance does not say when the MOF will perform initial exchanges, the BEPS Action 13 final report recommends that exchanges begin in June 2018 for MNE fiscal years that begin on or after January 1, 2016.
The MOF will exchange CbC reports with the following countries for fiscal years that begin on or after January 1, 2016:
Argentina; Australia; Bermuda; Bonaire; Cayman Islands; Canada; Colombia; Costa Rica; Guernsey; India; Indonesia; Iceland; Isle of Man; Japan; Jersey; Mauritius; Mexico; Norway; New Zealand; Russia; South Africa; South Korea; and the U.S.
The MOF will exchange CbC reports with the following additional countries for fiscal years that begin on or after January 1, 2017:
Brazil; Chile; Liechtenstein; Singapore; and Uruguay.
The MOF will exchange CbC reports with the following additional countries for fiscal years that begin on or after January 1, 2018:
Malaysia; Monaco; Pakistan; and Switzerland.
According to the OECD BEPS Action 13 final report, a CbC report should contain the following information:
- Aggregate information relating to the amount of revenue, profit (loss) before income tax, income tax paid, income tax accrued, stated capital, accumulated earnings, number of employees, and tangible assets other than cash or cash equivalents, with regard to each jurisdiction in which an “MNE group” operates.
- Identification of each “constituent entity” of the “MNE group,” including its jurisdiction of tax residence (when different from jurisdiction of tax residence, the jurisdiction under the laws of which the constituent entity is organized), and the nature of its main business activities.
The Action 13 final report recommends that annual CbC reports be filed in the ultimate parent entity’s jurisdiction of tax residence and shared between jurisdictions through the automatic exchange of information on a government-to-government basis under one of the following agreements:
- The OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters.
- Bilateral tax treaties.
- Tax information exchange agreements (TIEAs).
On January 27, 2016, the Czech Republic was among the 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 and 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.
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