Transfer Pricing
1. Aufl. 2021
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15. Country-by-Country Reporting
15.1. Description of the facts
In the FY 2020, Zeitgaist Commodity WFOE is undergoing a tax audit in China. The local tax auditors request Zeitgaist group’s Country-by-Country Report for the FY 2019 (CbCR 2019). The CbCR for FY 2017 as well as for FY 2018 have been shared with the local tax authorities already. Based on the CbCR 2019, the Chinese tax auditors would have expected Zeitgaist Commodity WFOE to be more profitable. The auditors therefore intend a transfer pricing adjustment.
15.2. Discussion and solution (Sebastian Schulz)
Basic problem. As a key outcome of the OECD/G20 BEPS project (Action 13), a three-tiered approach to transfer pricing documentation has been incorporated in the OECD TPG (Chapter V: Documentation), consisting of (i) the Master File, (ii) the Local File as well as (iii) the CbCR.
The goal of the CbCR is to provide transparency about the „allocation of the income, the taxes paid, and certain indicators of the location of economic activity among tax jurisdictions in which the MNE group operates” (para. 5.16 TPG). The CbCR should enable tax authorities to conduct a high-level transfer pricing and BEPS risk assessment, respective...