Country by Country Reporting

Country by Country reporting (CbCR) is a tax compliance obligation that was introduced by Council Directive (EU) 2016/881 and implemented into Maltese law through amendments to Subsidiary Legislation 123.127. CbCR is also part of the OECD’s actions to Base Erosion and Profit Shifting (BEPS).

CbCR requires multinational enterprises to file an annual tax report for the whole group in jurisdictions in which they have a tax residence, or in which they are subject to tax with respect to business carried out through a permanent establishment.

The competent authority receiving the report, generally Tax Authorities, may automatically exchange the information contained in the report with other EU member states in which any of the Constituent Entities would be tax resident.

Who needs to comply with CbCR?

CbCR applies to groups with a consolidated group revenue of Euro 750 million and above, or the equivalent in local currency. Multinational (MNE) groups with a consolidated group revenue below this threshold are excluded.

Which entity would file the CbC report?

The CbC report would need to be filed by the Ultimate Parent Entity (UPE). Each MNE would need to identify each Constituent Entity of the MNE group setting out the jurisdiction of tax residence of each Constituent Entity.

Constituent Entities may also be required to file a report in the respective jurisdictions where they are tax resident.

What information would need to be included in the CbC report?

Aggregate information on the MNE group would need to be reported on the following items:

  1. Revenue;
  2. Profit (loss) before income tax;
  3. Income tax paid
  4. Income tax accrued;
  5. Stated capital;
  6. Accumulated earnings;
  7. Number of employees; and
  8. Tangible assets, other than cash or cash equivalents

Timing: When does the CbC reporting requirement start?

Malta opted to start complying with CbCR as from the fiscal year beginning on or after 1 January 2016. MNEs are allowed one year from the close of the fiscal year to which the CbC report relates to prepare and file the CbC report – this means that the first CbC reports would need to be filed by 31 December 2017.

For MNEs with a financial year end other than 31 December, the first CBC report would need to be filed in 2018 – 12 months after the close of the relevant MNE fiscal year.

If the UPE is not obliged to file a CbC report in its home country, the Maltese constituent entity is exempted from filing the first year’s CbC report.

However, the entity would need to notify the Tax Authorities by the last day of filing the tax return for the relevant fiscal year (i.e. 30 September 2017 in the case of entities that have a financial year ending 31 December).

Taking action

The goal is to keep your business compliant with CbC reporting. We can help you identify whether your business needs to comply with CbCR and what action needs to be taken.

For more information, please contact Nicky Gouder or Luana Scicluna.