OECD Presents BEPS Tax Reform

On October 5, 2015, the OECD presented its final package to prevent base erosion and profit shifting (BEPS).

The package, containing 15 actions, includes the introduction of a country-by-country report (CbCR) for multinationals as well as revised standards for transfer pricing (TP) documentation.
The aim of these standards is to enhance transparency for tax administrations, taking into consideration the compliance costs for business.

Coordinated/ centralised TP process

The newly revised TP documentation standards appear to leave multinationals with no option other than to centralise or at the very least coordinate their TP process. As a result of the more detailed guidance provided by the OECD on TP and the increased scrutiny by tax administrations, multinationals must ensure that their TP process (including documentation) is robust and globally consistent

Three tiered standardised approach:

TP documentation should now comprise of following 3 elements:

  1. Master File: Should be available to all relevant tax administrations and contain high-level information regarding global business operations and TP policies (“blueprint” of the multinational).
  2. Local Files: Should be available to local tax administrations and contain more detailed information relating to specific intercompany transactions and focus on TP analyses related to intercompany transactions engaged in by local group companies.
  3. CbCR: Multinationals with annual revenues of EUR 750 million or more should file a CbCR in the jurisdiction of the ultimate parent company of the multinational. The CbCR includes a jurisdiction-by-jurisdiction information relating to the global allocation of income, taxes paid as well as the nature of the main business activities of individual group companies.

Annual review and update of documentation

Master File, Local Files and CbCR should be reviewed and updated annually. However, Tax administrations may determine that the searches in databases for comparable supporting parts of the LF are updated every 3 years. Furthermore, financial data for the comparison should be updated every year.

Implementation package

Participating jurisdictions are encouraged to implement legislation that enables CbCR for fiscal years beginning on or after 1 January 2016. As such an implementation package has been prepared containing model legislation regarding CbCR and arrangements for the automatic exchange of the CbCR under international agreements.


It is recommended that the Master File and Local Files are prepared and updated by the tax return due date for respectively the ultimate parent of the multinational and the local group companies.

Therefore, Master File and Local Files according to new standards are to be prepared by the tax return due date for financial years starting on or after January 1, 2016. Multinationals should be allowed 1 year from the close of their financial year to prepare and file the CbCR.
As a result, the first CbCRs would need to be filed by 31 December 2017.

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