ATO cuts multinationals some slack with BEPS extension

A last-minute extension the deadline for the first BEPS reports has given Australian multinationals breathing room.

A new Australian Taxation Office (ATO) announcement suggests that some of Australia’s multinational companies are feeling the deadline pressure as they prepare their country-by-country (CbC) reporting statements.

The statements are one of the most important elements in the OECD’s package of measures to fight base erosion and profit-shifting (BEPS).

Until new advice from the ATO at the end of November, Australian multinational businesses with December 2016 balance dates were to be required to file their first CbCR Local Files by 31 December.

However, that deadline has now been pushed out to 15 February 2018. The deadline extension covers local files and master files as well as CbC reports.

In a statement, the ATO said the deadline had been changed “to allow taxpayers adequate time to prepare their statements and seek ATO assistance if required”. The original deadline fell during the ATO’s Christmas shut-down, meaning the ATO would have been unable to respond to last-minute queries.

The ATO did not specify whether any reporting entities had asked for more time. But such deadline extensions are often a response to corporate representations. And both outside observers and executives within the affected multinationals have noted how tight the deadlines are for a new tax reporting system.

As detailed in Thomson Reuters’ BEPS whitepaper ‘Making BEPS a reality‘, the OECD’s package was only agreed in November 2015. Many countries have also been slow to settle their national reporting arrangements.

The ATO is generally acknowledged to have moved more quickly than most countries to put the necessary rules in place. But because the rules are aimed at multinational companies, those affected need to understand the rules for a variety of countries outside Australia.

Thomson Reuters’ 2017 Global BEPS survey of multinationals around the world indicated that the time and effort needed to gather and analyse group information were among the biggest obstacles to completion of BEPS reporting.

In a 22 November email, ATO CbC reporting director Caroline Bath told companies the ATO was “currently working to ensure this deferred due date is reflected in our systems”. Companies that received an auto-generated letter regarding lodgment of CbC statements should disregard it, she said.

Multinational companies with a 30 June balance date with need to complete and lodge their 2016-17 reports by 30 June 2018.

Country-by-country reporting requires a multinational’s ultimate parent entity to summarise the activity of its entities in each of the countries in which it operates. It must then submit the report to its home tax authority, and share it with other tax authorities.

The report must list in a precise format, for each national entity, the functions performed, assets owned, personnel employed, revenue generated, profits earned, taxes paid, capital structure, retained earnings and so on.

The OECD designed country-by-country reporting and other BEPS measures to reduce underpayment of taxes in higher-tax countries.

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