Country by Country reporting was introduced to Malta by L.N 400 of 2016. It amended the Cooperation with Other Jurisdictions on Tax Matters Regulations S.L123.127 (“The Regulations”).
It is a recent tax compliance obligation that requires multinational enterprises to annually file a comprehensive group tax report in every jurisdiction where they have a tax residence. The report is designed to show global tax information of the multinational group and of its constituent member entities. For every member entity of the group that is tax resident in a jurisdiction that has implemented the Country by-Country tax reporting standard, a general obligation is imposed to provide a report not only of its local activities but also to provide a complete tax-picture of the group, showing the relevant tax information of every other entity within the multinational group. This creates significant tax obligations at group and entity level.
A multilateral Convention setting out the framework for automatic exchange of information and documents has been entered into with a total of 108 countries being signatories. Within this framework, as at 1st March 2017, 57 countries have signed a multilateral agreement to exchange the CbC report within the “Country-by-Country” tax reporting standard in their respective jurisdictions. Apart from the multiple reporting obligation that this creates, the potential to trigger tax investigations across multiple jurisdictions is a concern well deserving of timely attention.
Who is affected by this legislation?
The Regulations apply to groups with a consolidated group revenue of €750,000,000 and above (or the equivalent in local currency). A multinational group with a consolidated group revenue below the €750,000,000 threshold is considered an “Excluded MNE”. Given the nature of activities and revenue, gaming entities are likely to meet the criteria triggering the CbC reporting obligations.
What entity within the group files the report?
The primary duty to file the report rests on the Ultimate Parent Entity of the group, following which Constituent entities are to file similar reports in the respective jurisdictions where they are tax-resident. In special circumstances specified in the Regulations, a Surrogate Parent Entity may be appointed to file the report on behalf of the group. A comprehensive appraisal of the group’s activities would be required to determine what member-entity is in the best position to file the report on behalf of the group. In certain circumstances, special rules apply for member entities that are tax-resident within the EU.
When should this report be filed?
The Regulations took effect from January 2016, making the first country-by-country report due as from January 2017. Therefore, every multinational group that meets the €750,000,000 threshold and having a Malta tax resident member bears a responsibility to file the report as from January 2017.
What are the penalties for non-Compliance?
Failure to comply with the Regulations attracts statutory penalties ranging from €200 to €50,000, depending on the nature and gravity of the default.
Do you need help?
KPMG Malta is here to help. They are among the leading service providers across the financial and non- financial industry arenas. Their team contains an experienced, multidisciplinary group of tax and advisory professionals that have worked on a range of global and national reporting projects for some of the world’s largest organizations. Their network of professionals can help you meet your reporting obligations with limited disruption to your business. They recognize that you face a number of regulatory requirements, especially considering the nature of your business. Their approach to CbC is consistent with their delivery of other regulatory consulting services, enabling you to achieve compliance synergies.
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