Daily Tax Update - February 26, 2016: UK Issues Final Regulations on Country-by-Country Reporting Requirements

UK Issues Final Regulations on Country-by-Country Reporting Requirements: Today, the UK released final regulations that require UK-headed multinational enterprises (MNEs), or UK subgroups of MNEs, to file annual country-by-country reports (CBCRs) with Her Majesty’s Revenue and Customs (HMRC).  The final regulations follow the UK’s earlier decision to implement the country-by-country reporting template developed by the Organization for Economic Cooperation and Development (OECD) as part of its Base Erosion and Profit Shifting (BEPS) project.  According to a policy paper issued in conjunction with the regulations, information collected in the CBCRs will “help HMRC to better assess international tax avoidance risks.  It is also intended that the information reported by MNEs will be shared with other relevant tax jurisdictions so that they too can identify when MNEs have engaged in certain forms of base erosion and profit shifting activity.”

The final regulations, which come into effect on March 18, impose a reporting requirement on any UK resident ultimate parent entity of an MNE with a consolidated group turnover of €750 million or more.  Such reporting requirement applies to accounting periods commencing on or after January 1, 2016.  Companies will have 12 months from the end of the relevant accounting period to file a report with HMRC.  The final regulations also require the top UK entity of an MNE to file a CBCR when it is not the ultimate parent entity of the MNE and the ultimate parent entity is resident in a country that either does not require CBCR or does not exchange reports with HMRC in accordance with an effective multilateral competent authority agreement.  As a result of this local filing requirement, the top UK entity of an MNE will file a CBCR covering all entities within the subgroup of which it is the head.  

The final regulations also include a provision that allows MNEs with a UK presence to, in certain situations, voluntarily file a CBCR with HMRC.  According to the policy paper, such circumstances would, “broadly speaking,” include situations “where the ultimate group parent is resident in a country that either doesn’t require CBCR or doesn’t exchange reports with HMRC in accordance with an effective competent authority agreement.”