Executive summary

On 25 September 2023, the Organisation for Economic Co-operation and Development (OECD) published a compilation of the outcomes from the sixth annual peer review (the Compilation) of the minimum standard on Action 13 (Transfer Pricing Documentation and Country-by-Country Reporting) of the Base Erosion and Profit Shifting (BEPS) project. The Compilation covers 136 jurisdictions and reflects a finding that implementation of country-by-country (CbC) reporting (CbCR) is largely consistent with the Action 13 minimum standard.

According to the press release, a large number of the recommendations made in the first five peer review phases have now been addressed by jurisdictions. However, 60 jurisdictions still have at least one recommendation outstanding.

Detailed discussion

Background

In October 2015, the OECD released the final reports on all 15 BEPS Action Plan focus areas. ¹Action 13 establishes CbCR requirements as a minimum standard subject to peer review. On 1 February 2017, the OECD released terms of reference for the peer review on the implementation of BEPS Action 13 on CbCR,² including the items to be reviewed in three key areas: (i) the domestic legal and administrative framework; (ii) the exchange of information framework; and (iii) the confidentiality and appropriate use of CbC reports.

The peer review process takes a staged approach that is intended to allow early detection of inconsistencies with the minimum standard and give jurisdictions the opportunity to address those inconsistencies. Phase one of the peer review focused on the domestic legal and administrative framework and certain aspects of confidentiality. Phase two focused on the exchange of information framework and appropriate use. Phase three and onward have covered all three key aspects of jurisdictions' implementation.

On 23 May 2018, the OECD released the first compilation of annual peer reviews, reflecting the review of 95 jurisdictions that provided legislation or information pertaining to the implementation of CbCR.³ The second compilation of annual peer reviews, covering 116 jurisdictions, was released on 3 September 2019.⁴ The third compilation of annual peer reviews, covering 131 jurisdictions, was released on 24 September 2020;⁵ the fourth compilation of annual peer reviews, covering 132 jurisdictions, was released on 18 October 2021;⁶ and the fifth compilation of annual peer reviews, covering 134 jurisdictions, was released on 4 October 2022.⁷

Sixth annual peer review report on CbCR

The latest Compilation covers the peer reviews of 136 jurisdictions and reflects a finding that implementation of CbCR is largely consistent with the Action 13 minimum standard. The report on each jurisdiction generally reflects the implementation status as of 31 March 2022, except that the information on the exchange of CbC reports reflects the status as of 31 December 2022.

According to the executive summary accompanying the Compilation, the sixth annual peer review covers the 136 jurisdictions⁸ that provided legislation and/or information relating to their implementation of CbCR, which covers almost all multinational entity (MNE) groups with consolidated group revenue of at least €750 million. Seven Inclusive Framework member jurisdictions⁹were not included in the peer review, either because they joined the Inclusive Framework after 1 October 2022 (when it was too late to incorporate them into this peer review) or because they opted out of the peer review in accordance with the peer review terms of reference. Jurisdictions opting out of the peer review must confirm that they do not have any resident entities that are the Ultimate Parent Entity of an MNE group with revenue meeting the consolidated revenue threshold and will not require local filing of CbC reports. Each jurisdiction reviewed received its own report, all of which together make up the Compilation.

Legislation implementing CbCR is in place in more than 110 jurisdictions. The sixth review resulted in 22 jurisdictions receiving a general recommendation to put in place or finalize their domestic legal or administrative framework¹⁰ and 30 jurisdictions receiving one or more recommendations for improvements to specific areas of their framework. In total, 60 jurisdictions have received at least one recommendation from this or a previous peer review that remain outstanding.¹¹

The Compilation further reports that 89 jurisdictions have multilateral or bilateral competent authority agreements in place, resulting in more than 3,000 exchange of information relationships. In this peer review, jurisdictions The Global Forum on Transparency and Exchange of Information for Tax Purposes has assessed 91 jurisdictions concerning confidentiality and data safeguards in implementing the automatic exchange of information standard and did not follow up with an action plan in this regard. As it contains non-public information on jurisdictions' internal systems and procedures, the outcomes of that assessment are not published, and no further details of the review of confidentiality are provided in the Compilation. In addition, 73 jurisdictions have provided detailed information about the appropriate use of CbC reports that enabled the Inclusive Framework to obtain sufficient assurance that measures are in place in jurisdictions to ensure the appropriate use.

Members of the Inclusive Framework will continue to monitor the implementation and operation of CbCR, as well as the progress that jurisdictions make in addressing the recommendations they have received. The next peer review report will be released in the third quarter of 2024.

Implications

The Compilation highlights the progress that has been made in implementing CbCR requirements around the world and the increased sharing of tax and financial data among tax authorities as a result. Companies should, therefore, expect that information provided to one tax authority through the filing of a CbC report will be shared with other relevant jurisdictions. In addition, plans for future deployment of OECD risk assessment tools, together with the existing use of CbCR data analytics by many tax authorities, underscores the need for companies to be confident that their data governance approach is sufficient to meet current and future demands. Moreover, CbC reports are central to several ongoing global projects, including the OECD/G20 BEPS 2.0 project and the Pillar Two Transitional CbCR Safe Harbour in particular.

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For additional information with respect to this Alert, please contact the following:

Ernst & Young Belastingadviseurs LLP, Rotterdam

• Marlies de Ruiter | marlies.de.ruiter@nl.ey.com

Ernst & Young Belastingadviseurs LLP, Amsterdam

• David Corredor-Velásquez | david.corredor.velasquez@nl.ey.com

Ernst & Young LLP (United States), Global Tax Desk Network, New York

• Jose A. (Jano) Bustos | joseantonio.bustos@ey.com

Ernst & Young LLP (United States), Washington, DC

• Barbara M. Angus | barbara.angus@ey.com

Published by NTD's Tax Technical Knowledge Services group; Carolyn Wright, legal editor

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ENDNOTES

¹ See EY Global Tax Alert, OECD releases final reports on BEPS Action Plan, dated 6 October 2015.

² See EY Global Tax Alert, OECD releases peer review documents on BEPS Action 5 on Harmful Tax Practices and on BEPS Action 13 on Country-by-Country Reporting, dated 6 February 2017.

³ See EY Global Tax Alert, OECD releases first annual peer review report (Phase 1) on Action 13, dated 29 May 2018.

⁴ See EY Global Tax Alert, OECD releases outcomes of the second phase of peer reviews on BEPS Action 13 and announces public consultation, dated 9 September 2019.

⁵ See EY Global Tax Alert, OECD releases outcomes of third phase of peer reviews on BEPS Action 13, dated 29 September 2020.

⁶ See EY Global Tax Alert, OECD releases outcomes of fourth phase of peer reviews on BEPS Action 13, dated 25 October 2021.

⁷ See EY Global Tax Alert, OECD releases outcomes of fifth peer review on BEPS Action 13 and updates CbCR guidance, dated 4 November 2022.

⁸ Andorra, Angola, Anguilla, Antigua and Barbuda, Argentina, Armenia, Aruba, Australia, Austria, Azerbaijan, Bahamas, Bahrain, Barbados, Belgium, Belize, Benin, Bermuda, Bosnia and Herzegovina, Botswana, Brazil, British Virgin Islands, Brunei Darussalam, Bulgaria, Burkina Faso, Cabo Verde, Cameroon, Canada, Cayman Islands, Chile, China (People's Republic of), Colombia, Congo, Costa Rica, Cote d'Ivoire, Croatia, Curacao, Czech Republic, Democratic Republic of the Congo, Denmark, Djibouti, Dominica, Dominican Republic, Egypt, Estonia, Eswatini (Kingdom of), Faroe Islands, Finland, France, Gabon, Georgia, Germany, Gibraltar, Greece, Greenland, Grenada, Guernsey, Haiti, Honduras, Hong Kong (China), Hungary, Iceland, India, Indonesia, Ireland, Isle of Man, Israel, Italy, Jamaica, Japan, Jersey, Jordan, Kazakhstan, Kenya, Korea, Latvia, Liberia, Liechtenstein, Lithuania, Luxembourg, Macau (China), Malaysia, Maldives, Malta, Mauritania, Mauritius, Mexico, Monaco, Mongolia, Montenegro, Montserrat, Morocco, Namibia, Netherlands, New Zealand, Nigeria, North Macedonia (Republic of), Norway, Oman, Pakistan, Panama, Papua New Guinea, Paraguay, Peru, Poland, Portugal, Qatar, Romania, Saint Lucia, Saint Vincent and the Grenadines, San Marino, Saudi Arabia, Senegal, Serbia, Seychelles, Sierra Leone, Singapore, Slovak Republic (Slovakia), Slovenia, South Africa, Spain, Sri Lanka, Sweden, Switzerland, Thailand, Togo, Trinidad and Tobago, Tunisia, Türkiye, Turks and Caicos Islands, Ukraine, United Arab Emirates, United Kingdom, United States, Uruguay, Vietnam and Zambia.

⁹ Albania, Belarus, Cook Islands, Saint Kitts and Nevis, Russian Federation, Samoa, and Uzbekistan. Although Belarus and the Russian Federation has not been included in the 2023 peer review process, a copy of the Belarus and Russian Federation's peer review reports for 2021 is included for information.

¹⁰ Angola, Antigua and Barbuda, Botswana, Brunei Darussalam, Cameroon, Congo, Djibouti, Dominica, Eswatini, Gabon, Grenada, Haiti, Honduras, Jamaica, Liberia, Namibia, North Macedonia, Paraguay, Saint Lucia, Senegal, Sierra Leone, and Trinidad and Tobago.

¹¹ Angola, Antigua and Barbuda, Armenia, Benin, Bosnia and Herzegovina, Botswana, Brunei Darussalam, Burkina Faso, Cabo Verde, Cameroon, China (People's Republic of), Congo, Côte d'Ivoire, Curaçao, Democratic Republic of the Congo, Djibouti, Dominica, Dominican Republic, Egypt, Eswatini, Faroe Islands, France, Gabon, Georgia, Greenland, Grenada, Haiti, Honduras, India, Israel, Jamaica, Jordan, Kazakhstan, Kenya, Liberia, Mauritania, Mongolia, Montenegro, Morocco, Namibia, Nigeria, North Macedonia (Republic of), Pakistan, Papua New Guinea. Paraguay, Romania, Saint Lucia, Saint Vincent and the Grenadines, Senegal, Serbia, Seychelles, Sierra Leone, Sri Lanka, Togo, Trinidad and Tobago, Ukraine, United States, Uruguay, Viet Nam, and Zambia.