Country-by-Country Reporting (CbCR)

With country-by-country reporting (CbCR), multinational enterprises (MNEs) with consolidated annual sales of EUR 750 million or more are obliged to submit an annual report on the global distribution of their income, taxes, assets and business activities in the countries in which they operate. 

The legal requirements for CbCR are based on the recommendations of the OECD as part of the Base Erosion and Profit Shifting (BEPS) project, in particular action point 13. In the EU, the CbCR obligation has been implemented by Directive 2016/881 (DAC4).

Challenges & opportunities for the company

Meeting the requirements of the CbCR regulation regularly presents companies with fundamental challenges. At the same time, however, there are also opportunities in preparing CbCR through early, clearly regulated and efficient processes.

Challenges of the CbCR regulations

Opportunities of the CbCR regulations

1. Non-Public CbCR (OECD)

If the requirements specified there are met, the country-by-country report must be prepared annually in accordance with the provisions of Section 138a AO and transmitted to the BZSt in an officially prescribed XML data format.

The translation of this tax law requirement into group reality can be divided into various phases. All phases should be accompanied by a process of continuous development and improvement:

Conceptualization and preparation

In a first step, a concept regarding the CbCR data and the CbCR process is required, which must then be prepared in terms of content. This includes the identification and definition of data sources, the specification/configuration of the data sources, the definition of the constituent entities to be included, the identification of relevant contact persons, the process structure and timeline as well as communication. In addition, technical support options should be evaluated and defined at an early stage.

Implementation (creation, conversion & transmission)

As part of the (annual) implementation, the actual collection, consolidation, preparation and plausibility check of the data for the creation of the CbCR is then carried out in accordance with the tax law requirements. Once the CbCR has been finalized, in addition to timely conversion and transmission to the BZSt, compliance with global requirements (notifications & local filing / secondary mechanisms) must also be ensured.

Analysis

Although a proactive risk analysis based on the submitted CbCR data is not legally required for the company, it is highly recommended from a risk management perspective. Such an analysis enables potential risks to be identified at an early stage and suitable measures to be taken to minimize tax uncertainties.

Our support services for non-public CbCR (OECD) at a glance:

2. Qualified CbCR (Pillar Two)

Based on the OECD Pillar Two Transitional CbCR Safe Harbour rules, a qualified country-by-country report is a prerequisite for the applicability of the simplification rules. Special conditions are placed on the data quality and consistency of the non-public CbCR (OECD), such as the accounting standards applied or the consideration of PPA adjustments (“push-down accounting”).

Our support services for Qualified CbCR (Pillar Two) at a glance:

3. Public CbCR (EU/ EWR)

The obligations regarding the preparation of the public income tax information report, its disclosure and the requirements regarding content and form, as well as sanctions, are regulated in Section 342 et seq. HGB. From a German perspective, the first reporting period for the companies concerned is the first financial year beginning after June 21, 2024. Implementation in other EU/EEA countries may deviate from this (e.g. implementation in Romania as early as 01.01.2023).

Our support services for Public CbCR (EU/EEA) at a glance:

Our digital WTS tools for CbCR