CbCR vs. GloBE Safe Harbor Rules: key considerations?

Given the interplay of the transitional GloBE safe harbor rules with the standing CbC Reporting rules, how can you make them work for you?

The introduction of transitional safe harbor rules represents a welcome relief for Swiss taxpayers preparing for Pillar 2. These rules rely heavily on standing CbC Reporting rules, changing the purpose and application of the CbC Reporting. Our blog summarizes the key considerations.

Country-by-Country Reporting (“CbCR”) has been around for several years now. Originally introduced by the OECD’s action plan against base erosion and profit shifting (“BEPS”) as a tool designed for tax authorities to carry out transfer pricing risk assessments on multinationals, the CbCR is still very much a work in progress. Known shortcomings include OECD rules on the basis and calculation of certain reporting items, which were vague from the outset – presumably to allow taxpayers some flexibility in dealing with the new reporting requirement. This has led to taxpayers developing and maintaining very individual approaches as to how figures are calculated and reported within their organization, with information in table 3 of the CbC report on the source of data and how these figures have been calculated varying significantly from company to company. In some instances, multinationals use management accounts for CbC purposes. 

Only very recently (October 2022) has the OECD published another round of “implementation guidance” as well as an overview on “frequent errors”, clarifying various topics that, in their essence and level of detail, could reasonably have been expected to be clear for years.

Gerhard Foth

Partner, Global Transfer Pricing Services

KPMG Switzerland

Blog author Johannes Uhde
Johannes Uhde

Senior Manager, Global Transfer Pricing Services

KPMG Switzerland

BEPS 2.0 / Pillar 2 GloBE rules

Meanwhile, another seismic shift has occurred in the international tax landscape with the OECD’s Pillar 2 global minimum tax rules, which present significant challenges for multinational taxpayers around the world. Given the complexity of rules set out in the GloBE Model Rules, taxpayers have had and still have to spend considerable effort in understanding the rules and implementing the necessary calculations and processes within their systems (including defining where and how to obtain the necessary data). 

In December 2022, so as to ease the efforts required to comply with the new rules, the OECD published transitional “safe harbor rules” for Pillar 2 / GloBE purposes. These safe harbor rules are largely based on an MNE’s CbCR, which abruptly shifts the purpose and background of the CbCR, suddenly putting it in the spotlight. 

In short, the transitional safe harbor rules have been built around the following cornerstones:

  • They set out a transitional period for all financial years until the financial year ending between 31 December 2026 and 30 June 2028 for Pillar 2 / GloBE purposes;
  • They allow for temporary safe harbors (i.e. a top-up tax of zero and a relief from extensive calculations) for multinationals that can demonstrate (largely based on their CbCR) that they have operated below relevant thresholds;
  • Temporary safe harbors may be applied if any of the following “tests” are met:
    • In a jurisdiction, total revenue according to the CbCR is below 10mEUR and profit (loss) before income tax is below 1mEUR (De Minimis test); or
    • Simplified Covered Taxes (income tax expense as reported in the Qualified Financial Statements, corrected by any taxes that are not covered taxes and uncertain tax positions reported in the Qualified Financial Statements), in relation to profit (loss) before income tax according to the CbCR is at least 15% in 2023 / 2024, 16% in 2025, and 17% in 2026 (Simplified ETR-test); or
    • Profit (loss) before income tax according to the CbCR in a jurisdiction is lower than the amount of the “Substance-based Income Exclusion” according to GloBE rules (% of tangible assets + % of payroll costs for employees) (routine profits test). 


The introduction of transitional safe harbor rules represents a welcome and much-needed relief for Swiss taxpayers already struggling with preparing for Pillar 2 against the ambitious implementation timeline. As a result, we expect that most multinationals will want to take advantage of these safe harbor opportunities to the extent possible.

However, given the interplay between the transitional safe harbor rules with the permanent CbC reporting rules, how can you make them work for you and what potential challenges should you be aware of?

The following are the main aspects to consider:

1. CbC data foundation

  • The thresholds for the different tests rely partly on data that are included in “qualified CbC reports”, i.e. CbC reports that are prepared and filed using “Qualified Financial Statements” only. For the purposes of applying Safe Harbor rules, the MNE therefore needs to derive the CbC data from qualified financial statements only, i.e.
    • Consolidation Accounts / Group GAAP: accounts used to prepare consolidated financial statements at the level of the ultimate parent entity of the group (in accordance with the respective accounting rules applied), or;
    • Local Accounts / Local GAAP: separate financial statements of each constituent entity (if they are prepared in accordance with an acceptable or authorized financial accounting standard).
  • In practice, our experience is that most Swiss multinationals that prepare and file a CbC report rely on consolidation data under Group GAAP to prepare the figures. However, a number of groups also base their CbC report on other information (e.g. management reporting figures) – which may not be a qualified financial statement for the purposes of the safe harbor rules. 

Action items & ToDos:

  • If you consider applying the safe harbor rules, double-check the foundation of your CbC data and adjust data collection processes, if necessary. This is especially relevant for taxpayers that currently use management reporting data for CbCR purposes. 
  • Make sure that data that are prepared outside of the CbC process (e.g. income tax expenses corrected by taxes not covered or uncertain tax positions for the simplified ETR-test) are readily available, calculation mechanisms are defined and the process is established. Consider amending existing CbCR processes in the organization to cover those items, if necessary.

2. Timing of CbC reporting and new interdependencies with financial reporting

  • For CbC purposes, the Swiss legislation in accordance with the OECD guidance foresees a deadline of 12 months after the end of the reporting year, by which the CbC report needs to be filed. In our experience, most Swiss taxpayers tend to wait with their data collection, preparation and filing of the CbC report until this deadline is approaching – resulting in a situation where most taxpayers with a financial year-end in December would in fact file their CbC Report for the reporting period only at the end of December of the subsequent financial year.   
  • In order to apply the safe harbor rules for GloBE / Pillar 2, the respective figures that are used for the calculations of the thresholds need to be available right before closing of the financial year, in order to determine whether a safe harbor can be used (no top-up-tax is due / calculations can be simplified), or whether this is not possible given the specific circumstances of the entities in the different jurisdictions for the financial year. This requires the CbC data to be available already at that time. 
  • In practice, provisioning for income tax is already happening per quarter or at half-year end at most MNEs. Therefore, at this stage, MNEs need to already anticipate their likely full-year “safe harbor simplified ETR” to determine whether they need to collect data and make detailed calculations.

Action items & ToDos:

  • Review your internal processes for CbC purposes and assess your readiness to collect data at the appropriate time should safe harbor rules for Pillar 2 become relevant.
  • If required, internal processes should be adapted so that the CbC data is prepared in parallel with the preparation of the figures for the financial statements, before tax provisions are recognized and the accounts for the financial reporting year are closed. In terms of system design and processes, steps should be taken to ensure that the CbC sata and safe harbor calculations that need to be performed on an ongoing basis can be incorporated smoothly into the GlobE information return.
  • Some decisions may already need to be taken as early as 2023 when Pillar 2 implementation projects are designed (e.g. whether baskets of “risk vs. no risk” countries from a top-up tax perspective are identified). 

3. Data processing and calculation / safe harbor application

  • Going forward, certain iterations in the calculations between the CbC sphere and the GlobE / Pillar 2 sphere are likely to be required. If all data are available at the financial year closing and if it is determined that the safe harbor rules cannot be applied and a top-up-tax is due, this may impact the income tax paid as reported under CbC rules, i.e. a certain iteration process between CbC data and GloBE / Pillar 2 tax accounting is possible. 
  • Many taxpayers (mostly due to the lack of specific guidance from the OECD on CbCR) have defined and documented internal calculation mechanisms in order to calculate the different items for the CbC report. This often includes a mapping of specific accounts/items in how those are treated for CbC purposes, aggregation mechanisms, and often only high-level comments on how these calculation mechanisms work as part of Table 3 of the CbC report. Given that the CbC figures are now the basis for elaborate calculations of thresholds for Pillar 2 safe harbor purposes and are suddenly in the spotlight for a very different purpose than originally designed for, it becomes important that these mechanisms are sound and in line with accepted standards and the latest OECD guidance and are also well documented within the organization. This for instance relates to the treatment of dividends as part of pre-tax profit (loss). 


  • In order to take advantage of the safe harbor rules, the existing CbCR processes and the resulting data are critical. This is particularly important given that the safe harbor rules represent a significant paradigm shift in terms of what the CbCR was originally designed to do and what it was used for.  
  • A careful assessment of both internal data and processes should be conducted to assess whether you are ready to apply the new safe harbor rules. 
  • In this respect, it will be important to:

a) make the right choices in the (further) design of the Pillar 2 project;
b) validate and document the safe harbor approach at the relevant provisioning dates (quarterly, half-yearly, year-end);
c) comply with Pillar 2 and reporting obligations; and
d) ensure that future CbC reports are in line with the latest OECD guidance.