Glossary

Permanent establishment

The term “MNE Group” means any Group that (i) includes two or more enterprises the tax residence for which is in different jurisdictions, or includes an enterprise that is resident for tax purposes in one jurisdiction and is subject to tax with respect to the business carried out through a permanent establishment in another jurisdiction, and (ii) is not a group that is excluded from filling CbCR.

[Source: OECD Base Erosion and Profit Shifting Project. Transfer Pricing Documentation and Country-by-Country Reporting. ACTION 13: 2015 Final Report.]

The term “Constituent Entity” means (i) any separate business unit of an MNE Group that is included in the Consolidated Financial Statements of the MNE Group for financial reporting purposes, or would be so included if equity interests in such business unit of an MNE Group were traded on a public securities exchange; (ii) any such business unit that is excluded from the MNE Group’s Consolidated Financial Statements solely on size or materiality grounds; and (iii) any permanent establishment of any separate business unit of the MNE Group included in (i) or (ii) above provided the business unit prepares a separate financial statement for such permanent establishment for financial reporting, regulatory, tax reporting, or internal management control purposes.

[Source: OECD Base Erosion and Profit Shifting Project. Transfer Pricing Documentation and Country-by-Country Reporting. ACTION 13: 2015 Final Report.]

The term “Ultimate Parent Entity” means a Constituent Entity of an MNE Group that meets the following criteria: (i) it owns directly or indirectly a sufficient interest in one or more other Constituent Entities of such MNE Group such that it is required to prepare Consolidated Financial Statements under accounting principles generally applied in its jurisdiction of tax residence, or would be so required if its equity interests were traded on a public securities exchange in its jurisdiction of tax residence; and (ii) there is no other Constituent Entity of such MNE Group that owns directly or indirectly an interest described in subsection (i) above in the first mentioned Constituent Entity.

[Source: OECD Base Erosion and Profit Shifting Project. Transfer Pricing Documentation and Country-by-Country Reporting. ACTION 13: 2015 Final Report.]

In the first column of the template [Table 1 of CbCR], the Reporting MNE should list all of the tax jurisdictions in which Constituent Entities of the MNE group are resident for tax purposes. A tax jurisdiction is defined as a State as well as a non-State jurisdiction which has fiscal autonomy. A separate line should be included for all Constituent Entities in the MNE group deemed by the Reporting MNE not to be resident in any tax jurisdiction for tax purposes.Where a Constituent Entity is resident in more than one tax jurisdiction, the applicable tax treaty tie breaker should be applied to determine the tax jurisdiction of residence. Where no applicable tax treaty exists, the Constituent Entity should be reported in the tax jurisdiction of the Constituent Entity’s place of effective management. The place of effective management should be determined in accordance with the provisions of Article 4 of the OECD Model Tax Convention and its accompanying Commentary.

[Source: OECD Base Erosion and Profit Shifting Project. Transfer Pricing Documentation and Country-by-Country Reporting. ACTION 13: 2015 Final Report.]

In the three columns of the template [Table 1 of CbCR] under the heading Revenues, the Reporting MNE should report the following information: (i) the sum of revenues of all the Constituent Entities of the MNE group in the relevant tax jurisdiction generated from transactions with associated enterprises; (ii) the sum of revenues of all the Constituent Entities of the MNE group in the relevant tax jurisdiction generated from transactions with independent parties; and (iii) the total of (i) and (ii). Revenues should include revenues from sales of inventory and properties, services, royalties, interest, premiums and any other amounts. Revenues should exclude payments received from other Constituent Entities that are treated as dividends in the payor’s tax jurisdiction.

[Source: OECD Base Erosion and Profit Shifting Project. Transfer Pricing Documentation and Country-by-Country Reporting. ACTION 13: 2015 Final Report.]

In the fifth column of the template [Table 1 of CbCR], the Reporting MNE should report the sum of the profit (loss) before income tax for all the Constituent Entities resident for tax purposes in the relevant tax jurisdiction. The profit (loss) before income tax should include all extraordinary income and expense items.

[Source: OECD Base Erosion and Profit Shifting Project. Transfer Pricing Documentation and Country-by-Country Reporting. ACTION 13: 2015 Final Report.]

In the sixth column of the template [Table 1 of CbCR], the Reporting MNE should report the total amount of income tax actually paid during the relevant fiscal year by all the Constituent Entities resident for tax purposes in the relevant tax jurisdiction. Taxes paid should include cash taxes paid by the Constituent Entity to the residence tax jurisdiction and to all other tax jurisdictions. Taxes paid should include withholding taxes paid by other entities (associated enterprises and independent enterprises) with respect to payments to the Constituent Entity. Thus, if company A resident in tax jurisdiction A earns interest in tax jurisdiction B, the tax withheld in tax jurisdiction B should be reported by company A.

[Source: OECD Base Erosion and Profit Shifting Project. Transfer Pricing Documentation and Country-by-Country Reporting. ACTION 13: 2015 Final Report.]

In the seventh column of the template [Table 1 of CbCR], the Reporting MNE should report the sum of the accrued current tax expense recorded on taxable profits or losses of the year of reporting of all the Constituent Entities resident for tax purposes in the relevant tax jurisdiction. The current tax expense should reflect only operations in the current year and should not include deferred taxes or provisions for uncertain tax liabilities.

[Source: OECD Base Erosion and Profit Shifting Project. Transfer Pricing Documentation and Country-by-Country Reporting. ACTION 13: 2015 Final Report.]

In the eighth column of the template [Table 1 of CbCR], the Reporting MNE should report the sum of the stated capital of all the Constituent Entities resident for tax purposes in the relevant tax jurisdiction. With regard to permanent establishments, the stated capital should be reported by the legal entity of which it is a permanent establishment unless there is a defined capital requirement in the permanent establishment tax jurisdiction for regulatory purposes.

[Source: OECD Base Erosion and Profit Shifting Project. Transfer Pricing Documentation and Country-by-Country Reporting. ACTION 13: 2015 Final Report.]

In the ninth column of the template [Table 1 of CbCR], the Reporting MNE should report the sum of the total accumulated earnings of all the Constituent Entities resident for tax purposes in the relevant tax jurisdiction as of the end of the year. With regard to permanent establishments, accumulated earnings should be reported by the legal entity of which it is a permanent establishment.

[Source: OECD Base Erosion and Profit Shifting Project. Transfer Pricing Documentation and Country-by-Country Reporting. ACTION 13: 2015 Final Report.]

In the tenth column of the template [Table 1 of CbCR], the Reporting MNE should report the total number of employees on a full-time equivalent (FTE) basis of all the Constituent Entities resident for tax purposes in the relevant tax jurisdiction. The number of employees may be reported as of the year-end, on the basis of average employment levels for the year, or on any other basis consistently applied across tax jurisdictions and from year to year. For this purpose, independent contractors participating in the ordinary operating activities of the Constituent Entity may be reported as employees. Reasonable rounding or approximation of the number of employees is permissible, providing that such rounding or approximation does not materially distort the relative distribution of employees across the various tax jurisdictions.Consistent approaches should be applied from year to year and across entities.

[Source: OECD Base Erosion and Profit Shifting Project. Transfer Pricing Documentation and Country-by-Country Reporting. ACTION 13: 2015 Final Report.]

In the eleventh column of the template [Table 1 of CbCR], the Reporting MNE should report the sum of the net book values of tangible assets of all the Constituent Entities resident for tax purposes in the relevant tax jurisdiction. With regard to permanent establishments, assets should be reported by reference to the tax jurisdiction in which the permanent establishment is situated. Tangible assets for this purpose do not include cash or cash equivalents, intangibles, or financial assets.

[Source: OECD Base Erosion and Profit Shifting Project. Transfer Pricing Documentation and Country-by-Country Reporting. ACTION 13: 2015 Final Report.]