Country-by-Country reporting and transfer pricing documentation
Country-by-Country reporting (CbC) is part of a broader suite of international measures aimed at combating tax avoidance through more comprehensive exchanges of information between countries.
CbC reporting implements Action 13External Link of the OECD/G20 Base Erosion and Profit Shifting (BEPSExternal Link) Action Plan.
The measure takes effect from income years commencing on, or after, 1 January 2016. It requires multinational entities with an annual global income of AUD $1 billion or more to provide us with three statements known as the Local file, Master file and the CbC report within 12 months after the end of their income tax year.
The statements require multinationals to report details regarding their international related party dealings, revenues, profits, and taxes paid by jurisdiction.
Australia is currently one of 44 countriesExternal Link to sign a multilateral agreementExternal Link that will facilitate the exchange of CbC reports between tax authorities in different jurisdictions. This will assist in gathering a global picture of how multinationals operate, so we can better assess transfer pricing risks.
Who does CbC reporting apply to?
CbC reporting applies to significant global entities, which are broadly defined as global parent entities with annual global income of AUD $1 billion or more, or a member of a consolidated group of entities where the global parent entity has annual global income of AUD $1 billion or more.
This definition includes both Australian headquartered multinationals and the local operations of foreign headquartered multinationals.
Statements must be lodged electronically in the approved form.
The OECD has released details of the final XML schemaExternal Link for the standardised exchange of CbC reports between jurisdictions. The XML schema is an international standard and must be used to provide us with the CbC report.
The high level design for the Local file is now available. The instructions to go with the Local file and the XML schema to lodge the file are in development and will be available on this page.
We are adopting Annex I of the OECD guidance on Action 13 as the Master file. Further information on how to lodge the Master file will be made available on this page.
Legislation on Australia's commitment to implement the OCED's new transfer pricing standards (CbC reporting) took effect from 1 January 2016.
Law Companion Guideline
We have developed a Law Companion Guideline that describes how we will apply the law as amended by Schedule 4 to the Tax Laws Amendment (Combating Multinational Tax Avoidance) Act 2015.
That Schedule implemented Australia's CbC reporting regime which is represented by Subdivision 815-E of the Income Tax Assessment Act 1997.
Paragraphs 1–39 of this guideline are a public ruling. If you rely on these paragraphs in good faith, you will not have to pay any relevant penalties.
For an outline of the general principles and processes the ATO takes in relation to exempting a particular entity from some or all of its CbC reporting obligations, please see Country-by-Country Reporting: Exemption Guidance.
If an entity wishes to apply for an exemption from providing one or more statements under CbC reporting, it should provide us with a written request (by emailing the CbC Reporting Project Team).
Information for software developers
The BEPS Action Plan adopted by the OECD and G20 countries in 2013 recognised that enhancing transparency for tax administrations, by providing them with adequate information to assess high-level transfer pricing and other BEPS-related risks, is a crucial aspect for tackling the BEPS problem.
Legislation to implement the OECD's new transfer pricing standards (commonly referred to as Country-by-Country (CbC) reporting) was enacted in December 2015.