Close
Close

OECD provides updated guidance on ‘local filing’ requirements

RFP
Tax Hot Topics: OECD provides updated guidance on ‘local filing’ requirementsOn May 4, 2017, the Organisation for Economic Co-operation and Development (OECD) provided updated guidance on the circumstances under which a jurisdiction may require the filing of a Country-by-Country (CbC) report by a resident constituent entity that is not the ultimate parent entity of its group (referred to as local filing). Local filing is not a minimum standard required as part of CbC reporting, but was included in the action reports issued as part of the comprehensive package of recommended measures known as the base erosion and profit shifting project.

The updated guidance provides specific situations when a jurisdiction should consider mandating a local filing. The OECD clarified that local filings should be applied only in exceptional circumstances when either (1) the ultimate parent entity (UPE) of an multinational enterprise group is not obligated to file a CbC report in its residence jurisdiction; (2) the residence jurisdiction of the UPE has a current international agreement (multilateral or bilateral tax convention or tax information exchange agreement providing for the automatic exchange of tax information) with the residence jurisdiction of a constituent entity, but there is no qualifying competent authority agreement in place between the two jurisdictions by the end of 12 months following the end of the fiscal reporting year of the multinational enterprise group; or (3) there has been a systemic failure to exchange CbC reports by the residence jurisdiction of the UPE, which has been noted to the constituent entity by the tax authority in its residence jurisdiction.

In the guidance provided, the OECD also addressed a transitional issue arising when a jurisdiction requires the filing of CbC reports by resident UPEs before Dec. 31, 2017, and has the capacity to impose a local filing obligation on resident constituent entities that are not UPEs. The OECD noted that it is working to ensure UPEs are not affected by these earlier local filing obligations during the transition period, and also provided specific guidance on this issue related to constituent entities in Brazil and China.

Contact
David Sites
Partner, Washington National Tax Office
T +1 202 861 4104

Cory Perry
Tax – Manager, Washington National Tax Office
T +1 202 521 1509

Tax professional standards statement
This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.