Information exchange for risk assessment purposes

The recommendations worded as part of OECD’s Base Erosion and Profit Shifting (BEPS) project have great influence on the international practice of transfer pricing. The goals of the BEPS action plan are to avoid shifting profits to low- or no-tax locations and to make the international exchange of information more efficient. One of the means to achieve this goal is Country-by-Country Reporting, (CbCR). According to an overview by Mazars, by introducing CbCR transfer pricing registries become three-tier systems, although the new rule only refers to multinationals with sales revenues above EUR 750 million.

The idea is that a corporate group has to file a tax report in one country only, and the tax authorities of this country will send the report to the tax authorities of other countries. Hungary has already introduced the new regulation. The CbCR is basically a risk assessment tool that reveals in which countries a group is present, what revenues and tax base it has reported, how many people work for the group and what the value of its assets is. So far 57 countries have signed the so-called CbCR agreement.