For many businesses and their tax teams, BEPS CbCR is new, complex and challenging. But with the right planning and approach it can be effectively managed.
In the two years since the release of the OECD’s Base Erosion and Profit Shifting (BEPS) plan, much has been written about how governments will implement it. Less has been written about the experience of the businesses actually putting it in place.
For many businesses and their tax teams, BEPS is new, complex and challenging.
As the director in charge of tax for Thomson Reuters in Australia, I’d like to explain a little about why that is – and what can be done to make it manageable.
After all, it’s multinational businesses that must make BEPS measures work. We have to implement new processes and give authorities the new information that has been mandated.
And there’s no time to waste. Businesses with December 2016 balance dates must file CbCR Local Files by 15 February 2018.
Thomson Reuters is uniquely placed to comment on this challenge, for three reasons:
- We’re going through the BEPS CbCR process ourselves.
- We provide software for BEPS CbCR compliance and talk to tax leaders about what they’re doing.
For three years we’ve been surveying tax leaders around the world on their BEPS progress.
On the ground
Thomson Reuters most recent survey found two-thirds of executives across the globe are facing challenges in implementing their BEPS response.
There are two main concerns. The first is that the BEPS agreement gives individual nations choice as to how they implement the measures. The ATO has responded quickly and clearly but BEPS rules remain unfinished in some countries – and multinationals have to respond to the rules of many different countries.
The second concern is that the BEPS measures may require substantial changes to IT systems and business uptake of new technology for BEPS has been minimal so far.
Some companies are outsourcing the management of BEPS measures to accounting firms. It can be an expensive option that reflects companies’ discomfort with the newness of the system and the complexity of the data required.
And of course, no-one wants to be hit with a late lodgement fine: they start at $105,000 and range up to $525,000.
[subhead] How Thomson Reuters is dealing with BEPS
Thomson Reuters has an advantage in dealing with BEPS – we get to use our own software.
Our North American parent has produced a CbCR file using OneSource BEPS Action Manager. To complete that, they have reached out to all the various heads of tax internationally for our input and review.
This process ensures the accuracy and consistency of our CbCR. A draft output goes out to all of our global tax teams. They make sure that they are comfortable with their disclosures. They also check that the accounting information that will be reported as part of the country-by-country report is consistent and accurate.
And of course, we use the OneSource BEPS Action Manager to prepare the Australian local file as well.
The number of tasks required can seem overwhelming. For the Australian Local File, every controlled transaction one must articulate the names and details of the counterparties, the amount of consideration payable, the transfer pricing method, the amount of the expenditure, the consideration payable, the category of the transaction, a copy of the written agreement between the entities, and more.
So you need to have an efficient process in place.
The right tools
Thomson Reuters’ OneSource BEPS Action Manager is a tool that enables us to manage the sheer volume and complexity of information involved in this task. It helps us to collaborate with colleagues overseas, and to complete all the tasks through to lodgement with the ATO. It takes us through the process step by step. With the volume of information and the prescriptive nature of the requirements, the BEPS Action Manager has been indispensable.
Of course, the ATO provides high-level design guidance for local files. Yet it wasn’t until we received the BEPS Action Manager local file and looked at the input data that we discovered how much more we still had to do. We realised then that we needed to answer a lot more questions to give the ATO what they want.
BEPS CbCR is new, complex and challenging. It’s also an ongoing commitment, year after year. You need to take ownership, to get the visibility and control that comes from managing your own tools. Once you get your BEPS processes set up, software can help manage the annual BEPS reporting requirement, potentially reducing costs and leading to a more efficient process.
To learn more about BEPS implementation, download our white paper: