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In brief

The main objective of OECD base erosion and profit shifting (BEPS) Action Item 13 (Transfer Pricing Documentation and Country-by-Country Reporting (CbC Reports)) is to standardize the information provided to tax authorities in order to increase transparency and combat transfer pricing and base erosion risks. One key tool contained in Action 13 to meet this objective is the framework for government-to-government mechanisms to exchange CbC Reports. The framework provides that CbC Reports are automatically exchanged where the relevant jurisdictions execute bilateral competent authority arrangements(CAAs).

In depth

The automatic exchange of CbC Reports is intended to increase international tax transparency and improves the access of tax authorities to information regarding the global allocation of the income and taxes paid by multinational enterprises (MNEs).

On 24 September 2020, the OECD released the third peer review report on Action 13 CbC Reports, which found that 40 of the 131 reviewed countries have yet to finalize a domestic legal or administrative framework for CbC reporting. In the United States, the first filing obligation for CbC Reports applies to fiscal years commencing on or after 1 July 2016. The United States also allows MNE groups to file CbC Reports voluntarily for fiscal years beginning between 1 January 2016, and 30 June 2016.

The OECD’s report recommended that the United States should continue to work actively towards signing bilateral CAAs with jurisdictions of the Inclusive Framework that meet the confidentiality, consistency, and appropriate use conditions, and with which the United States has an agreement in effect that allows for the automatic exchange of information. The United States has concluded CAAs with more than 40 jurisdictions, adding Curaçao to the list earlier this year. The United States is also continuing negotiations with several others jurisdictions, including Cyprus, France, and Germany.

On 4 September 2020, the Cyprus Tax Department issued a statement to clarify that the CAA for the automatic exchange of CbC Reports with the United States, which is still under negotiation, is expected to be effective for fiscal years starting on or after 1 January 2020. The delayed effective would give rise to a local filing obligation in Cyprus for US-based MNEs for fiscal years prior to 1 January 2020.

This arises because, under the OECD’s model legislation, local report filing is required for US-based MNEs in cases where there is no CAA between the United States and the relevant jurisdictions, but there is still an international agreement that forms the legal basis for automatic exchange of information between the two jurisdictions (such as a bilateral income tax treaty).

Joint statements have also been issued by the Competent Authorities of the United States and France and by the Competent Authorities of the United States and Germany expressing the intention to spontaneously exchange CbC Reports for fiscal years of MNE groups commencing on or after January 1 January 2016 and before 1 January 2019, while bilateral CAAs are being negotiated.

On 5 December 2019, the United States and French governments, in a joint statement, announced that while the countries are continuing their negotiation to conclude a CAA, the Competent Authorities will, pursuant to Article 27 of the US-France Tax Treaty (authorizing exchange of information for tax purposes), engage in spontaneous exchange of CbC Reports for fiscal year 2018.

The Competent Authorities of the United States and France acknowledged in the statement that assessing high-level transfer pricing risks and other base erosion and profit shifting risks, as well as economic and statistical analysis, where appropriate, are critical objectives of exchanging CbC Reports that should not be postponed. Similar statements were released for fiscal years 2016 and 2017.

The United States and German governments released similar statements authorizing the spontaneous exchange of CbC Reports for the same years pursuant to Article 26 of the US-Germany Tax Treaty.


Sahar Zomorodi is a member of the Firm’s North America Tax Practice Group in New York, where she works on international tax planning and transactions and transfer pricing matters. Sahar has recently spent a year at the Firm's Amsterdam office, where she provided U.S. tax advice to European based clients. Sahar has over 10 years of experience in transfer pricing in the private sector and the Internal Revenue Service. Prior to joining the Firm, Sahar was an economist and team leader with the IRS's Advance Pricing and Mutual Agreement Program in Washington, DC. Sahar is a frequent speaker at Bloomberg BNA and Baker McKenzie conferences. Sahar also contributes to the Firm’s publications, such as the Global Transfer Pricing Handbook and the Global Legal Guide for Luxury & Fashion Companies. Sahar is an active member of the Firm’s Pro Bono and Diversity Committees.