Country-by-Country Reporting

Backgrounder

In November 2015, Canada and its G20 partners endorsed the outcomes of the G20/Organisation for Economic Cooperation Development (OECD) Base Erosion Profit Shifting (BEPS) project at the G20 leaders’ summit in Antalya, Turkey. 

The BEPS project identifies domestic and international recommendations in 15 action areas to address tax avoidance and to ensure that profits are taxed where economic activities are performed.

Country-by-country reporting is one of the most significant recommendations. It requires all multinational enterprises (MNEs) with annual consolidated group revenues of €750 million (approximately $1.1B CAD) or more to file an annual country-by-country report documenting the MNE’s combined amounts of revenue, profit, taxes paid and accrued, number of employees, stated capital, retained earnings, and tangible assets for each tax jurisdiction in which it does business.

This information is then exchanged with tax treaty partners that have implemented the reporting standard, and can be used by tax administrations to determine how best to use audit resources and to improve their ability to assess risk associated with MNEs. To facilitate these exchanges, countries are given the option to sign a Multilateral Competent Authority Agreement (MCAA) on Country-by-Country (CbC) reporting.  Canada has already signed the MCAA and is committed to continued collaboration with treaty partners.

The country-by-country reporting requirement will improve transparency and improve the consistency of transfer pricing documentation on a worldwide basis.  This is an important tool to assist in Canada’s efforts to promote compliance and minimize opportunities to shift taxable profits away from the jurisdiction where the underlying economic activity has taken place.

For more information on Canada’s actions in response to the BEPS project, visit: http://www.budget.canada.ca/2016/docs/tm-mf/si-rs-en.html

Hon. Diane Lebouthillier Canada Revenue Agency Economics and Industry