Country-by-Country Reporting (CbCR)

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INTRO

NON-PUBLIC CBCR (OECD)

QUALIFIED CBCR (PILLAR TWO)

PUBLIC CBCR (EU/EWR)

CONTACT

FAQS

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

Availability of information

A variety of possible data sources, different levels of detail, centralized vs. decentralized availability and missing data make it difficult to ensure data quality and consistency.

Responsibilities

The necessary interdisciplinarity (TP, Tax, Accounting, Legal, BW & IT, etc.), identification of the right contacts, lack of capacity and the need for mutual (specialist) understanding (“translation”) make data collection challenging.

Processes

Complex global processes of data entry, data revision and consolidation as well as the constant changes in the Group environment (projects) must be harmonized with the tax law requirements.

System support

Numerous source systems and little system support for CbCR purposes lead to the need for manual merging of data and an increased susceptibility to errors.

Opportunities of the CbCR regulations

Early recognition of tax risks

By providing detailed information, companies can identify potential risks at an early stage and take appropriate measures to minimize tax uncertainties.

Positive impact on reputation

Compliance with CbCR regulations demonstrates a company's commitment to transparency and compliant behavior, which can have a positive impact on its reputation.

Clear processes for data collection

Collecting and managing the required data can be complex and time-consuming. Companies should invest in robust data management systems and establish clear processes for data collection and processing.

Error avoidance

Ensuring the consistency and accuracy of the reported data is crucial. Regular reviews and audits can help to avoid errors and ensure the quality of the reports.

We provide you with comprehensive support

Regardless of whether you are currently dealing with the implementation of the classic non-public CbCR (OECD), want to make use of the simplification regulations regarding the minimum tax on the basis of a qualified CbCR, or are already thinking about the upcoming public CbCR (EU/EEA) - we will provide you with comprehensive support!

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:

Concept

1/5

- Workshops to explain the CbCR Excel template and the requirements regarding Qualified CbCR (Pillar Two) and Public CbCR (EU/EEA)

- Support in the creation of a concept regarding the CbCR data and the CbCR process

Creation

2/5

- Annual support with the preparation of the CbCR

Conversion & transmission

3/5

- Conversion of the completed Excel file into the required XML format

- Possible implementation for the following countries: Germany, Switzerland, Sweden and countries that accept an OECD pure file

- Transmission of the XML file to the BZSt

Analysis

4/5

- One-off analysis of CbCR data based on the OECD example risk report

- Annual support in preparing the risk analysis based on the submitted CbCR data

Licensing WTS Tools

5/5

- WTS CbCR-2-XML (conversion & transmission)

- WTS CbCRmanager (conversion & transmission, high-level risk analysis)

- WTS CbCR Risk Analyser (comprehensive and detailed risk analysis)

- Workshops to explain the CbCR Excel template and the requirements regarding Qualified CbCR (Pillar Two) and Public CbCR (EU/EEA)

- Support in the creation of a concept regarding the CbCR data and the CbCR process

- Annual support with the preparation of the CbCR

- Conversion of the completed Excel file into the required XML format

- Possible implementation for the following countries: Germany, Switzerland, Sweden and countries that accept an OECD pure file

- Transmission of the XML file to the BZSt

- One-off analysis of CbCR data based on the OECD example risk report

- Annual support in preparing the risk analysis based on the submitted CbCR data

- WTS CbCR-2-XML (conversion & transmission)

- WTS CbCRmanager (conversion & transmission, high-level risk analysis)

- WTS CbCR Risk Analyser (comprehensive and detailed risk analysis)

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:

One-off quality analysis

1/2

- Preparation of written documentation of the CbCR data collection

- Presentation of the legal requirements and suggestions for adjustments

- Presentation in a web meeting

Ongoing technical support

2/2

- Responding to ad hoc requests

- Detailed statement

- Preparation of written documentation of the CbCR data collection

- Presentation of the legal requirements and suggestions for adjustments

- Presentation in a web meeting

- Responding to ad hoc requests

- Detailed statement

Pillar Two

Do you need efficient advice on implementing a Pillar Two IT solution, including compliance and declaration obligations?

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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:

Concept

1/5

- Explanation of the legal Public CbCR requirements in Germany and monitoring of implementation in the others, advice in EU/EEA inbound cases, workshops - Explanation of the Public CbCR Excel template

- (Support in) transitioning the existing non-public CbCR to the new public CbCR requirements

- CbCR quality analysis: Review and preparation of written documentation of previous CbCR data collection and presentation of possible adjustment proposals, consistency check with other publications, in particular annual report

- Support with the identification of relevant stakeholders and integration into existing company processes (annual audit, internal communication & management reporting, external publications)

- Support in determining the type & scope of disclosure and publication in relation to the Public CbCR (fulfillment of minimum legal requirements, additional explanations, proactive disclosures) & ensuring consistency with other publications

Creation

2/5

- Annual support with the preparation of the Public CbCR

Conversion & transmission

3/5

- Conversion of the completed Excel file into the required format

- Transmission of the data to the company register

Analysis

4/5

- Proactive analysis of the CbCR data to be published and preparation for expected stakeholder inquiries

- One-off analysis of CbCR data based on the OECD example risk report

- (Annual support with) preparation of the risk analysis

Licensing WTS Tools

5/5

- WTS CbCR-2-XML (conversion & transmission)

- WTS CbCRmanager (conversion & transmission, high-level risk analysis)

- WTS CbCR Risk Analyser (comprehensive and detailed risk analysis)

- (Support in) transitioning the existing non-public CbCR to the new public CbCR requirements

- Support with the identification of relevant stakeholders and integration into existing company processes (annual audit, internal communication & management reporting, external publications)

- Annual support with the preparation of the Public CbCR

- Conversion of the completed Excel file into the required format

- Transmission of the data to the company register

- Proactive analysis of the CbCR data to be published and preparation for expected stakeholder inquiries

- One-off analysis of CbCR data based on the OECD example risk report

- (Annual support with) preparation of the risk analysis

- WTS CbCR-2-XML (conversion & transmission)

- WTS CbCRmanager (conversion & transmission, high-level risk analysis)

- WTS CbCR Risk Analyser (comprehensive and detailed risk analysis)

Your contact persons

Andrea Groiß

Andrea Groiß is a director at WTS and your expert for all country-by-country reporting topics.

Contact

Andreas Riedl

Andreas Riedl is a partner at WTS and your expert for all transfer pricing topics.

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Our digital WTS tools for CbCR

WTS CbCR-2-XML

Our online tool WTS CbCR-2-XML fulfills the German requirements for creating and transmitting the required XML file. The WTS portal covers the technical transfer of data from tables 1-3 into the required structure.

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WTS CbCRmanager

With the help of our CbCRmanager, a web-based IT solution, the documentation obligations required by OECD regulations and the requirements of local legislation can be fulfilled.

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Country-by-Country Reporting Risk Analyser

We have developed the Country-by-Country Reporting Risk Analyzer to proactively and efficiently identify anomalies and anomalies in CbCR data. The aim is to carry out a risk assessment that is (as far as possible) identical to the tax authorities' approach.

Learn more

FAQs about Country-by-Country Reporting (CbCR)

What is non-public CbCR (OECD)?

CbCR was originally introduced on the basis of the OECD's recommendations as part of the Base Erosion and Profit Shifting (BEPS) project, in particular action point 13. The aim was to support the tax authorities as addressees of the report with the help of greater transparency in the identification of tax avoidance strategies. It was implemented in the EU by Directive 2016/881/EU and in Germany on the basis of Section 138a of the German Fiscal Code (AO).

What is a Qualified CbCR (Pillar Two)?

With the introduction of the minimum tax (OECD Pillar Two), simplification rules were established, for the applicability of which the existence of a so-called qualified CbCR is a prerequisite. The implementation of these OECD Pillar Two Transitional CbCR Safe Harbour regulations, which impose special conditions on the data quality and consistency of non-public CbCR (OECD), was regulated in Germany in the Minimum Tax Act.

What does Public CbCR (EU/EEA) mean?

Following a decision by the EU (Directive 2021/2101/EU), the country-by-country key figures of multinational companies that are either domiciled in the EU or the EEA or have branches of a certain size there are now to be published in accordance with certain requirements. The existence of a disclosure obligation and the correctness of the disclosure should also be the subject of the audit in future. Public CbCR is implemented in Germany on the basis of Section 342 et seq. HGB.

Compared to non-public CbCR (OECD), the personal scope of application of public CbCR (EU/EEA) is extended and there are differences in the content and definition of the entities to be included. However, Section 342h (4) HGB provides for an option to derive further disclosures from CbCR in accordance with Section 138a AO.

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