CPABC in Focus - May/June 2015 | Page 38

E in which the MNE operates. The data to be provided in the CbyC template consists of revenue (both related and unrelated); profit before tax; income tax paid and accrued; stated capital; the number of employees; and tangible assets. Specifically, the report is meant to provide or identify: •  n understanding of the “bigger A picture”; •  global view of the MNE’s value chain; A •  hether revenues and profits recognized W in particular jurisdictions accord with the people and the functions performed in those jurisdictions; •  isibility regarding affiliates (and their V results) located in low-tax jurisdictions or havens; and •  e potential artificial shifting of Th substantial amounts of income into tax-advantaged environments. Early in 2015, the G20 finance ministers announced that CbyC reporting will become a requirement for all MNEs with annual consolidated revenues greater than US$850 million, effective for the 2016 taxation year. At the time of this writing, details about how the CbyC reports are to be filed and shared among participating tax authorities were not yet available. But it’s not hard to imagine the scrutiny with which tax authorities will review an MNE group’s transfer pricing if, for example, the CbyC template shows millions of third-party revenue and hundreds of employees in North America but only nominal profit, while the group’s related Barbados entity shows only related-party revenue and a nominal number of employees but millions in profit. Interestingly, the OECD has stated that an MNE is allowed to choose which data it will use to populate the CbyC template (i.e. separate entity statements, regulatory statements, or internal management statements). Different sources may produce different results. What this all means There are several key takeaways from the OECD guidance: The landscape is changing Although the OECD transfer pricing guidelines are not the law in Canada, most practitioners believe it is only a matter of time before Canada and other countries legislate or require that the OECD three-tiered approach, or some variation thereof, be applied in their jurisdictions.2 The existing transfer pricing documentation is more narrowly focused and limited than the new guidelines, which call for much greater disclosure regarding all aspects of an MNE’s business and results. The best way for large MNEs to prepare for the transition to greater  pain, for example, recently announced S 2 that Spanish-based MNEs with revenues greater than ¤45 million (equivalent to approximately C$60 million to C$65 million) will now be required to prepare and submit a master file as well. Finally, something both sides of your brain can agree on. ©2015 Mercedes-Benz Canada Inc. Shown above is the 2015 C400 4MATIC™ Sedan with optional Sport Package. CPABC members receive a fleet discount. For more information, call Randall DesBrisay at 604-351-5290 or email [email protected] Mercedes-Benz Vancouver 550 Terminal Avenue, Vancouver D#6276 Mercedes-Benz Boundary 3550 Lougheed Highway, Vancouver D#6279 38  CPABC in Focus •May/June 2015 2015-04-1666-MB-April-C-Class Fleet-CPABC Ad.indd Mercedes-Benz North Shore 1375 Marine Drive, North Vancouver D#6277 Mercedes-Benz Richmond 5691 Parkwood Way, Richmond D#6278 Mercedes-Benz Surrey 15508-104 Avenue, Surrey D#11013 1 2015-04-1666-MB-April-C-Class Fleet-CPABC Ad.indd 2015-04-08 5:01 PM INTERNAL REVISION 1 C M Y K CPABC In Focus