Country-by-Country Report (CbCR) — The Country by Country Report (CbCR) is a standardized annual filing that provides tax authorities with aggregate financial and tax data for each jurisdiction where a multinational enterprise (MNE) operates.
The Country-by-Country Report (CbCR) is a standardized annual filing that provides tax authorities with aggregate financial and tax data for each jurisdiction where a multinational enterprise (MNE) operates. Introduced under OECD BEPS Action 13, CbCR enables tax authorities to assess high-level transfer pricing and BEPS risks by showing where profits are reported relative to where economic activity occurs.
CbCR is the third tier of the OECD's documentation framework, alongside the Master File (global overview) and Local File (transaction-specific detail).
OECD/Regulatory Reference
The OECD Transfer Pricing Guidelines (2022), Annex III to Chapter V, prescribe CbCR content. BEPS Action 13 requires CbCR to include aggregate information relating to revenue, profit (loss) before income tax, income tax paid and accrued, stated capital, accumulated earnings, number of employees, and tangible assets for each tax jurisdiction in which the MNE group operates.
The €750 million consolidated group revenue threshold was established as the standard for CbCR filing requirements, though some jurisdictions have adopted lower thresholds.
In Practice
CbCR Data Elements (Per Jurisdiction):
Data Element
Description
Revenue
Related-party and unrelated-party revenue
Profit/Loss Before Tax
Pre-tax income by jurisdiction
Tax Paid (Cash)
Corporate income tax actually paid
Tax Accrued
Current-year tax expense
Stated Capital
Paid-in capital
Accumulated Earnings
Retained earnings
Number of Employees
Headcount or FTEs
Tangible Assets
PP&E excluding cash and intangibles
CbCR Table 2: Lists all entities in each jurisdiction and their main business activities.
CbCR Table 3: Additional explanations where needed.
Risk Assessment Tool: Tax authorities use CbCR primarily for risk assessment, not as direct evidence of transfer pricing compliance. Large profits in low-tax jurisdictions with few employees may trigger audit selection. CbCR data alone doesn't prove or disprove arm's length pricing.
Example
MNE Group: USCo with operations in US, Ireland, and Germany
Jurisdiction
Revenue (€M)
Profit Before Tax (€M)
Employees
Tangible Assets (€M)
USA
500
80
1,200
150
Ireland
200
120
50
10
Germany
300
25
400
80
Risk Indicator: Ireland shows €120M profit with only 50 employees and €10M tangible assets. Tax authorities may question whether profit allocation aligns with value creation and request Local File review.
MNEs with consolidated group revenue of €750M or more in the preceding fiscal year. The filing obligation typically rests with the ultimate parent entity. Some jurisdictions have lower thresholds or secondary filing requirements if the parent is in a non-exchanging jurisdiction.
Is CbCR publicly disclosed?
In most jurisdictions, CbCR is confidential—shared only between tax authorities through automatic exchange agreements. However, the EU has adopted public CbCR requirements for certain large MNEs, requiring publication of aggregate data by jurisdiction.
How is CbCR used by tax authorities?
Primarily as a risk assessment tool. Tax authorities compare profit allocation to indicators of economic activity (employees, assets, revenue). Misalignments may trigger audit selection. CbCR data alone doesn't determine transfer pricing compliance—detailed analysis requires Local File review.
What if CbCR data looks unfavorable?
Prepare supporting documentation explaining business rationale. High profits in low-substance jurisdictions may be legitimate (e.g., IP holding companies with valuable intangibles). Ensure Master File and Local Files consistently explain the value drivers and transfer pricing policies.
How does CbCR relate to Master File and Local File?
The three documents form a coherent picture: Master File provides global context, CbCR shows financial outcomes by jurisdiction, and Local Files provide detailed transaction support. Tax authorities review all three together. Inconsistencies raise credibility concerns.
What penalties apply for CbCR non-compliance?
Penalties vary by jurisdiction—ranging from fixed amounts to percentage-based penalties. Many countries impose penalties for late filing, incomplete data, or failure to file. Some jurisdictions treat non-compliance as a criminal offense for large MNEs.
Can CbCR data be used to make transfer pricing adjustments?
CbCR is not intended as a basis for direct transfer pricing adjustments. The OECD explicitly states CbCR data alone shouldn't be used to calculate arm's length prices or make adjustments. However, it may inform audit selection and risk assessment that leads to detailed examination.