Country-by-Country Reporting (CbCR)

Country-by-country reporting (CbCR) is a requirement for large multinational groups to give tax authorities a yearly breakdown of their income, profit, taxes and economic activity for each jurisdiction in which they do business. The report lets a tax administration see, on one page, where a group books its profits and where it actually has staff, assets and sales, so that mismatches can be selected for closer review.

The rule was developed by the Organisation for Economic Co-operation and Development and the G20 as Action 13 of the Base Erosion and Profit Shifting project, whose final reports were published in 2015. It is one of the project's minimum standards, which members of the Inclusive Framework have committed to adopt. It forms part of a three-tier approach to transfer pricing documentation, alongside a master file describing the group as a whole and a local file for each country.

The obligation applies to a multinational group whose consolidated revenue in the preceding fiscal year was at least 750 million euros, or a near equivalent in local currency. Smaller groups are outside the standard. The report is normally filed by the ultimate parent entity with the tax authority of the country where it is tax resident, within twelve months of the end of the fiscal year. The first reports covered fiscal years starting on or after 1 January 2016.

If the parent's country does not require the report or does not exchange it, another group company may file as a surrogate parent, or local subsidiaries may be asked to file directly. Group companies usually also have to notify their own tax authority of which entity is filing.

The OECD template has three tables. The first gives aggregate figures for each tax jurisdiction; the second lists every group entity by jurisdiction with its main business activities; the third allows free-text explanation. The figures in the first table are:

• Revenue. Split between sales to unrelated parties and transactions with related parties.
• Profit or loss before income tax. The pre-tax result for all entities in the jurisdiction.
• Income tax paid and accrued. Cash tax paid in the year and the current-year tax charge, which may differ from the tax provision in the accounts because deferred tax is excluded.
• Capital and earnings. Stated capital and accumulated earnings.
• Substance indicators. The number of employees and the value of tangible assets other than cash.

Groups may draw the data from consolidation reporting packages, statutory accounts or internal management accounts, provided the source is used consistently. The figures are aggregated rather than consolidated within each country, so they can include intercompany income that would be removed in the group's consolidated financial statements.

The parent's tax authority passes the report automatically to the authorities of the other jurisdictions listed in it, provided an exchange agreement is in force. Most exchanges take place under a multilateral competent authority agreement built on the Convention on Mutual Administrative Assistance in Tax Matters, and others under bilateral double taxation treaties. The mechanism resembles the automatic exchange of information on financial accounts under the Common Reporting Standard.

Receiving authorities must keep the report confidential and use it appropriately: for high-level risk assessment of transfer pricing and profit shifting, and for economic analysis. It may not be used as a substitute for a detailed transfer pricing analysis, and adjustments may not be based on the report alone.

The OECD standard is confidential, but separate rules require some groups to publish similar data. Banks in the European Union have had to disclose turnover, profit, tax and staff numbers by country under the Capital Requirements Directive since the mid-2010s. A wider EU directive adopted in 2021 requires large groups active in the Union to publish a report on income tax information for financial years starting on or after 22 June 2024. Australia has introduced its own public regime, and voluntary sustainability standards also include a country-by-country tax disclosure.

CbCR data has taken on a second role under the Pillar Two global minimum tax. A transitional safe harbour allows a group to use figures from a qualifying report to show that its operations in a jurisdiction are low risk, sparing it the full effective tax rate calculation for a limited period. This has raised the importance of data quality, since errors in the report can now have direct tax consequences.

Business groups point to the compliance cost and to the risk that raw figures will be misread, since low tax in one year can reflect losses, incentives or timing rather than tax avoidance. Campaigners argue the opposite: that the revenue threshold excludes most companies, that developing countries receive few reports because they lack exchange agreements, and that confidential filing limits public scrutiny of the use of any tax haven.

• OECD: Base Erosion and Profit Shifting