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In October 2015, the OECD published the results of a joint project of the OECD and the G20, “Base Erosion and Profit Shifting” (BEPS), which proposes a set of measures to counteract base erosion and profit shifting. BEPS Action 13 revises the OECD standards for the documentation of transfer pricing. Multinational enterprises will now document their transfer pricing in three parts: the master file for the corporate group and the company-specific local files will be supplemented by largely standardized country reports (“country-by-country reporting,” or “CbC” reporting for short). Group parent companies with domestic and foreign revenues of more than EUR 750 million are required to prepare country-by-country reports, which are ultimately an aggregated presentation showing the global distribution (by country) of certain key performance indicators within the group. The reports are intended to illustrate the business relationships within each multinational enterprise in each financial year so as to enable the national authorities to assess the risk of presumed profit shifting.



Germany has already implemented BEPS Action 13 into national law  (§ 138a of the Tax Code). For companies whose financial year is the calendar year, country-by-country reports for the 2016 assessment period were to be submitted to the German Federal Central Tax Office in Bonn (“BZSt”) through the end of 2017 at the latest. In accordance with the declaration of 13 December 2018, this requirement expressly included the exchange of information between Germany and the US. However, companies are still required to submit annual tax declarations electronically to the (management) tax office.

CbC reports are to be prepared separately and electronically in an officially prescribed data format (XML format) and transmitted to BZSt. The reports may be transmitted in English. The figures to be reported to BZSt, based on the consolidated financial statements, include e.g. revenues, income taxes, earnings, capital, number of employees and key business activities, presented in a matrix for each country. Permanent establishments are also to be included in the report, and are to be treated like corporations.

BZSt is the responsible body in Germany to receive CbC reports from Germany and forward them to the responsible authorities abroad. BZSt receives CbC reports from abroad and forwards them to the appropriate (management) tax office in Germany. Accordingly, the CbC reports have the character of a cross-border tax audit tracer note between the tax authorities of various countries. BZSt may also analyze the CbC reports itself and store them for up to 15 years. It is therefore to be expected that, in future tax audits in Germany, a time series comparison will be performed for each group company and that significant deviations will be investigated.

If the foreign group parent company fails to prepare a CbC report, the German subsidiary is required to submit the report. If the CbC report is not submitted to BZSt, or is incomplete or submitted in an untimely manner, the company commits a tax offense and may face a fine of up to EUR 10,000, which may be imposed multiple times.



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