Contact
Hans Röll

Phone: +39 (04 71) 19 43 - 200
E-Mail

Luca Schroeder

Phone: +39 (04 71) 19 43 - 200
E-Mail

On March 8, 2017  the Italian Ministry of Economy and Finance published the long awaited decree concerning the Country-by-Country Reporting ("CbCR"; see Decree of 23 February 2017), implementing the exchange of CbCR for Multinational Enterprise ("MNE") groups in Italy as agreed on OECD level (see "Action 13" of the BEPS Action Plan ).

The information which has to be transmitted through the CbCR should allow tax administrations to detect so-called "BEPS-Practices", leading to the erosion and shift of taxable income. The requested information is listed in form of a table in the appendix of the decree and has to be depicted either in aggregated form on a country-by-country basis (e.g. split of related party and unrelated party revenues, profit or loss before taxes, number of employees) or individually for each enterprise (including permanent establishments; e.g. main business activity). Unlike the already existing regulation on transfer pricing documentation in Italy, this is a binding regulation affecting all MNE groups with a consolidated revenue of at least 750 million Euro.

In principle the subsidiaries have to send the requested information to the ultimate parent entity, which will forward it to the tax administration of the country of residence of the ultimate parent entity on an aggregated basis. The tax administration of the country of residence of the ultimate parent entity then submits the CbCR to the tax administrations in the countries of the subsidiaries. However, exceptions have to be considered, especially if no obligation to prepare the CbCR in the country of residence of the ultimate parent entity exists. In this case the obligation to submit the CbCR in Italy, containing information of the whole group, falls back on the (Italian) subsidiary.

The following dates have to be considered by the MNE´s:

  • First preparation for the fiscal year beginning on or after January 1, 2016.
  • Italian ultimate parent entity: Communication to the Italian Tax Administration that the CbCR was prepared within the tax return (i.e. not later than 9 months after the end of the fiscal year).
  • Italian subsidiary: Communication to the Italian Tax Administration which company of the MNE group will prepare the CbCR within the tax return (i.e. not later than 9 months after the end of the fiscal year).
  • Submission of the CbCR to the Italian Tax Administration within 12 months after the last day of the affected fiscal year.

The exchange of the CbCR between the tax administrations generally occurs within 15 months after the last day of the affected fiscal year (within 18 months in 2016).

Consistent with the OECD-specifications, the decree refers specifically to the fact that the CbCR can be used to assess the tax risk but cannot be used as a basis for transfer pricing adjustments.

From the perspective of the Italian subsidiaries, amongst others, the following To Do´s have to be considered:

  • Check if in the country of the ultimate parent entity the same obligation concerning the CbCR came into force for fiscal years beginning on or after January 1, 2016 (this is generally the case for ultimate parent entities based in Germany).
  • Group-internal coordination concerning the data-gathering and the data-exchange.
  • Communication within the tax return regarding the entity that prepares the CbCR.