31 countries have concluded the Multilateral Competent Authority Agreement (“MCAA”) for the automatic exchange of Country-by-Country reporting. The OECD is of the view that the MCAA will enable consistent and swift implementation of the new Transfer Pricing Reporting Standards developed under Action 13 of the BEPS Action Plan.
What this means is that the tax authorities to the MCAA has now the ability to obtain a complete understanding of the way the Multi-National Enterprises (MNEs) structure their operation while also ensuring that the confidentiality of such information is safeguarded.
“Under this multilateral agreement, information will be exchanged between tax administrations, giving them a single, global picture on the key indicators of multinational businesses. This is a much-needed tool towards the goal of ensuring that companies pay their fair share of tax, and would not have been possible without the BEPS Project.” said OECD Secretary-General Angel Gurría.
Impact on the MNEs
Starting from 2016 accounts, the tax administrators will get aggregate information annually relating to the global allocation of income and taxes paid, together with other indicators of the location of economic activity within the MNE group.
It will also cover information about which entities do business in a particular jurisdiction and the business activities each entity engages in.
The information will be collected by the country of residence of the MNE group, and will then be exchanged through exchange of information supported by such agreements as signed today. First exchanges will start in 2017-2018 on 2016 information. In case information fails to be exchanged, the Action 13 report on transfer pricing documentation provides for alternative filing so that the playing field is levelled.
Implications for Singapore
Singapore is not one of the signatories to this MCAA. The latest Transfer Pricing Guidelines issued by the IRAS on 4 January 2016 did not introduce the requirement for taxpayers to implement Country-by-Country reporting, notwithstanding that consultation is ongoing regarding implementation.
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