It has been close to eight years since the OECD introduced the Country-by-Country Reporting (CbCR) filing requirement as part of Action 13. Groups mulled over the new reporting requirement, identifying new processes to gather transfer pricing data which had not previously been compiled into a single report. Groups deep dived definitions and the implementation guidance in the initial years to ensure compliance.

Fast forward five years after the filing of the first CbCR in 2017, most groups now have, what they consider to be, a well-oiled process to populate this report every year.  Most groups have been able to manage this filing over the past few years without surprises, meeting the annual filing deadline where they have 12 months after the group’s financial closing to gather this data.

Interactions between the CbCR and Pillar Two

Just as groups were getting comfortable with the CbCR and the processes they have implemented, the CbCR is back in the spotlight. With the impending implementation of the global minimum tax under Pillar Two, groups are wrapping their heads around the CbCR-based transitional safe harbour, which aims to provide administrative relief to groups by potentially eliminating the need for detailed Pillar Two calculations for jurisdictions that meet one of the three tests under the safe harbour. While assessing the data needed to perform the safe harbour calculations, whether the existing CbCRs would constitute qualifying CbCRs for this purpose, and whether applying the safe harbour would definitely be worthwhile the effort, groups are also confronted with the likelihood of having to prepare their CbCRs well ahead of the 12-month period they have been used to. Groups with quarterly financial reporting requirements may need to find a practical approach to determine the impact of the CbCR transitional safe harbour to meet disclosure needs. In the event where changes to the CbCR are required in order to apply the Pillar Two transitional safe harbour, such changes will also need to be disclosed in the Action 13 CbCR itself.

Upcoming public reporting of the CbCR

Another upcoming tax transparency requirement that groups will be faced with is the EU Public CbCR. As EU Member States face an impending deadline to locally implement the EU Directive on this public reporting by 22 June 2023, groups are having to plan for this public disclosure of their CbCR – which in the case of certain groups, may trigger a first filing by 31 December 2024 (to meet Romanian requirements, which already applies for 2023). While groups most likely already have the required data to populate the EU Public CbCR, the more pressing concern is how such information will be perceived or interpreted by the wider public. Tax teams will have to work with their Public Relations and Corporate Communications teams to ensure the narrative accompanying this public disclosure is a consistent messaging – which business leaders within the group will also need to be informed of and prepared for.

To bring it all together, the Australian authorities have also announced plans to implement the Australian Public CbCR, which takes the disclosures a step further by potentially requiring Effective Tax Rates in line with Pillar Two calculations to be disclosed as well.

Opportune time to review the CbCR process

This wave of developments – which increases the number of uses of the CbCR and changes the way it is reported and how it may be perceived – might be a signal for groups to use the occasion to review its existing CbCR and the data collection process, and to identify any data gaps to meet all the different requirements. Groups will want to avoid multiple work streams and identify a common process and framework to process a broad enough set of data, in a timely manner.  Performing a dry run and getting the right internal stakeholders involved would also provide sufficient time to refine and improve the process ahead of the implementation of the respective requirements.

Process flow CbCR implementation

Reach out to KPMG’s transfer pricing professionals about the next steps to take in dealing with the different dimensions of the CbCR.


Authors: Kathy Lim, Yves de Groote, Andres Delanoy, Dirk Van Stappen