On 22 March 2016, the Organisation for Economic Development and Co-operation ("OECD") released a standardised electronic format to facilitate the consistent and uniform preparation, filing and exchange of Country-by-Country ("CbC") reports. The CbC reports will be transmitted between revenue authorities in accordance with the Extensible Markup Language Schema ("XML Schema"),which is a data structure for electronically holding and transmitting information.
The User Guide issued by the OECD on the CbC XML Schema explains the information required to be included in each data element in the CbC report and the specific attributes of that data element in the following sections:
- message header, which includes the sender, recipient, message type and reporting period;
- identifying information, to be provided for each Constituent Entity, including the Reporting Entity; and
- body of the CbC report, containing the reportable information on the Reporting Entity and each Constituent Entity, as well as a summary of the activities of the Multi-National Enterprise ("MNE").
For MNEs in South Africa, the specific use of the CbC XML Schema may result in MNEs having to modify their information technology ("IT") systems to contain the information, data elements and specific attributes which are required.
I. Message header
The information in the message header identifies the Competent Authority that is sending the message, as well as the Competent Authorities receiving the message. The information in the message header specifies when the message was created, what period the report is for and the nature of the report (i.e. whether it is an original, corrected or supplemental report).
The specific data elements in the message header include:
- the jurisdiction of the Competent Authority transmitting the message and the jurisdictions of the Competent Authorities that are receiving the message, using the two-character alphabetic country code and country name list based on the ISO 3166-1 Alpha 2 standard
- the language in which the contents are provided, by indicating the relevant language code pursuant to ISO 639 – Part 1 (ISO 639-1:2002)
- a unique identifying number, which is created by the sender and identifies the particular message being sent. The identifier allows both the sender and receiver to identify the specific message later if questions or corrections arise. The first part of the identifier should be the country code of the jurisdiction of the sending Competent Authority; the second part, the year to which the information relates; and the third part, a unique identifier created by the sending jurisdiction.
An optional data element in the message header allows the sender to define the nature of the CbC report being sent by identifying whether the data is new, corrected or supplementary data.
II. Identifying information
This section identifies each of the Constituent Entities on which information is to be provided as part of the CbC report.
The specific data elements in the identifying information section include:
- the country codes of the tax jurisdiction of the Constituent Entity
- tax identification number ("TIN") used by the tax administration of the tax jurisdiction of the Constituent Entity
- the full legal name of the Constituent Entity, including the domestic designation for the legal form, as indicated in its articles of incorporation or any similar document. Where the Constituent Entity is a permanent establishment, the name of the Constituent Entity should be followed by "(P.E.)"
- Although the CbC reporting template does not require that the address of each Constituent Entity be reported, it is strongly recommended in the User Guide that this information is provided so as to ensure that the data in the CbC XML Schema is of a high quality, is accurately matched and appropriately used by the receiving jurisdictions. To this end, there is a specific data element that includes the permanent residence address of a Constituent Entity.
III. CbC body
The CbC body contains the information on the Constituent Entities, including the Reporting Entity of the MNE group for which a CbC report is filed, as well as the key indicators of both the MNE group as a whole and the individual Constituent Entities, as per the CbC reporting template.
For each tax jurisdiction in which the MNE Group operates, the CbC body data elements contain:
- the role of the Reporting Entity with respect to the filing of the CbC report (i.e. whether it is the Ultimate Parent Entity or a Surrogate Parent Entity)
- a summary of the key financial indicators. All financial amounts must be provided in full units, i.e. without decimals, and any negative values should be identified by entering a "-" in front of the amount and each financial amount must accompanied by the appropriate three-character currency code based on the ISO 4217 Alpha 3 Standard
- a list of all the Constituent Entities and their business activities. The nature of the main business activities carried out by a Constituent Entity in the relevant tax jurisdiction should be specified by selecting at least one available code
An additional information data element has been included in the CbC body section, which allows for the entering of any additional information on the CbC report that the Reporting Entity wishes to make available to the receiving Competent Authorities in a free text format.
If, after having completed the CbC report, the Reporting Entity and/or the sending jurisdiction becomes aware of inaccurate information, which has been included in the CbC report after filing, adjustments to part of the report will need to be made, in accordance with the guidance set out in the User Guide. In order to facilitate a targeted reporting of corrections, the CbC XML Schema is split into a number of correctable types, allowing the correction of specific parts of the report without needing to resubmit the entire report.
MNEs with head offices in South Africa are encouraged to start developing appropriate IT systems in preparation for implementation of the CbC XML Schema reporting.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.