The IRAS issued the e-Tax Guide on Country-by-Country Reporting (“CbCR’) on 10 October 2016 to provide taxpayers with guidance on the purpose of CbCR and the obligation to provide a CbC Report; and also how to complete and submit a CbC Report to IRAS.
As previously mentioned by IRAS, CbCR is compulsory to Singapore MNE group with international operations and annual group revenue of at least S$1,125 million (i.e. EUR750m).
1 Singapore will be introducing legislation for CbCR. The public consultation on draft Income Tax (Amendment) (No. 3) Bill 2016 was carried out from 8 July to 29 July 2016. The Bill will be introduced to parliament in 2016. This e-Tax guide provides administrative guidance for the implementation of CbCR.
IRAS’ Transfer Pricing Guidelines require taxpayers to organise their transfer pricing documentation at Group level and Entity level.
4.2 CbC Reports are supplementary to such transfer pricing documentation.
4.3 A CbC Report requires aggregate tax jurisdiction-wide information relating to the global allocation of the income, the taxes paid, and certain indicators of the location of economic activity among tax jurisdictions in which the reporting MNE group operates. The report also requires a listing of all the entities (including permanent establishments) for which financial information is reported, including the tax jurisdiction of incorporation, where different from the tax jurisdiction of residence, as well as the nature of the main business activities carried out.
What is a CbC Report?
A CbC Report is used for high-level transfer pricing risk assessment purposes by tax authorities in evaluating other BEPS related risks and where appropriate for economic and statistical analysis. IRAS has clarified that the information in the CbC Report
- should not be used as a substitute for a detailed transfer pricing analysis of individual transactions and prices based on a full functional analysis and a full comparability analysis;
- on its own does not constitute conclusive evidence that transfer prices are or are not appropriate; and
- should not be used by tax administrations to propose transfer pricing adjustments.
What is the format of a CbC Report?
IRAS has stated that a CbC Report must be submitted in accordance with the template in the Annex to the e-Tax Guide. It comprises three tables:
The first table
- provides an overview of income, taxes, employees and assets of the MNE group allocated to the different tax jurisdictions that the group operates in, i.e. each line reports the aggregated numbers relating to a particular tax jurisdiction. For example, if an MNE group has income arising from three jurisdictions, this table will show three lines – one for each jurisdiction.
The second table
- provides an overview of the entities (including permanent establishments) of the MNE group, again organized according to the tax jurisdictions that the entities are tax resident in. The main business activities of each entity are also indicated. Dormant entities must also be included in this table.
The third table
- allows the MNE group to provide any additional information that it feels would be relevant and useful to interpret or understand the data provided in the CbC Report.
Submission of CbC Reports
IRAS is currently developing e-services for receiving and sending CbC Reports with a sufficient level of encryption. As the first CbC Reports will be required for data for FY 2017, and a Reporting Entity will have 12 months from the end of a financial year to submit the CbC Report for that financial year, the earliest CbC Report required to be submitted to IRAS would be due by 31 December 2018 (for a financial year ending on 31 December 2017).
Based on available information, IRAS will identify taxpayers affected by CbCR and provide further information on the submission of CbC Reports in the first half of 2018. Any taxpayer who believes that it will be required to file a CbC Report may also contact IRAS to find out more about CbCR. In the event that the taxpayers did not submit the CbC report, they may be penalized under Section 105M of the ITA.
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