In an international context marked by tax cooperation and the need to prevent base erosion, the Country-by-Country Report (CbCR) has become a key tool in the global tax system.
Developed within the framework of Action 13 of the BEPS Plan of the Organization for Economic Cooperation and Development (OECD), this report seeks to provide tax administrations with a clear and standardized view of how multinational groups distribute their income, profits, and taxes across different jurisdictions.
Beyond a formal requirement, the CbCR represents a tool for transparency and control, designed to help authorities identify transfer pricing risks, detect discrepancies in profit allocation, and improve tax fairness between countries.
Rationale and objectives of the CbCR
The Country-by-Country Report (CbCR) was introduced by Action 13 of the BEPS Project of the OECD and the G20 as a tool to strengthen international tax transparency and improve the ability of tax administrations to assess risks of base erosion and profit shifting.
The CbCR seeks to provide a comprehensive and standardized view of the global distribution of income, profits, taxes paid, and economic activities of multinational enterprises (MNEs). In this way, authorities can identify whether the reported profits correspond to the economic substance and functions performed in each jurisdiction.
Its main objectives include:
- Assessing risks of aggressive tax planning, detecting possible misalignments between profits and actual economic presence.
- Fostering international cooperation through the automatic and confidential exchange of information between participating tax administrations.
- Promoting transparency and accountability by providing a clear picture of how multinational groups distribute their value and tax burden across different jurisdictions.
- Aligning taxable profits with value creation, ensuring that profits are taxed where economic activities are actually carried out and business risks are assumed.
The CbCR is also part of a tiered documentation system established by the OECD, together with the Master File and the Local File. Together, these three levels of information allow administrations to perform a comprehensive transfer pricing risk analysis based on both quantitative and qualitative data.
Scope and threshold of application
The Country-by-Country Report (CbCR) must be submitted by multinational groups whose consolidated annual turnover exceeds €750 million (or the equivalent in local currency) during the previous fiscal year. This threshold was set by the OECD with the aim of focusing the obligation on conglomerates with greater economic capacity and international presence, which account for the largest share of cross-border flows and, therefore, the greatest potential risk of tax base erosion.
The report is submitted annually to the tax authorities of the country where the group’s ultimate parent entity is located, which is responsible for collecting information from all affiliated entities. When the parent company is located in a jurisdiction that does not participate in the automatic exchange of information, or that does not guarantee the confidentiality or appropriate use of data, subsidiaries may be required to file the report in their own jurisdiction through secondary or substitute filing mechanisms.
The scope of the CbCR is truly global: more than a hundred countries have adhered to the BEPS Inclusive Framework, committing to implement the minimum standard of Action 13 and to automatically exchange reports under multilateral agreements. This system of international cooperation has enabled tax administrations to gain a comprehensive view of the economic activity of multinational groups, strengthening the early detection of tax risks and promoting fairer competition between jurisdictions.
Structure and content of the report
The Country-by-Country Report (CbCR) uses a standardized format defined by the OECD to ensure the international comparability and consistency of data. It consists of three main tables, each focusing on a key aspect of tax analysis.
Table I – Financial information by jurisdiction:
Includes total revenue, pre-tax profits, taxes paid and accrued, capital, retained earnings, number of employees, and tangible assets. These data allow for the detection of possible mismatches between profits and economic substance, helping to identify risks of profit shifting.
Table II – Constituent entities:
Lists all entities in the group, their country of tax residence, and the nature of their main activities. This information provides a structured view of the group’s operating model and how its functions and risks are distributed.
Table III – Additional information:
Allows explanations or notes to be included that contextualize the financial data, such as restructurings or extraordinary events. These observations facilitate the interpretation of the report and reduce the possibility of erroneous analysis by the authorities.
Overall, the CbCR format provides tax administrations with a clear and verifiable overview of the multinational group’s economic activity, which is essential for assessing transfer pricing risks and tax consistency.
Use by tax administrations
The CbCR is not used for direct transfer pricing adjustments, but as a risk assessment tool.
According to the OECD, the report allows authorities to identify:
- Jurisdictions where profits are disproportionate to economic activity.
- Possible discrepancies between reported profits and the number of employees or assets used.
- Business structures that could lead to base erosion.
Thanks to the automatic exchange of information, countries can compare CbCR data with other reports, strengthening international tax consistency.
Challenges and best practices for implementation
The preparation of the Country-by-Country Report (CbCR) involves various technical and organizational challenges for multinational groups. Among the most relevant is the consolidation of global information, which requires integrating financial data from different jurisdictions and accounting systems, ensuring uniformity and accuracy.
Another important challenge is maintaining consistency with other transfer pricing reports, such as the master report and the local report. Differences between these documents can lead to audit risks and questions from tax authorities.
Likewise, the management of sensitive data requires special attention, since the CbCR, although confidential, contains strategic information that reflects the group’s operational and financial structure.
To address these challenges, the OECD recommends establishing robust internal controls, designating specialized teams responsible for data collection and validation, and conducting technical reviews prior to filing the report to ensure consistency and accuracy across all jurisdictions involved.
Impact and outlook
The CbCR has established itself as a pillar of global tax transparency. Its implementation has improved the detection of transfer pricing risks and strengthened cooperation between countries. In addition, the information obtained has served as the basis for the development of complementary initiatives, such as the Global Minimum Tax (Pillar Two), which seeks to ensure a minimum tax rate of 15% on the profits of multinationals.
In the future, the CbCR standard is expected to evolve toward greater data granularity, and some countries are expected to move toward public versions of the report, in line with demands for corporate social responsibility and tax transparency.
Conclusion
The Country-by-Country Report (CbCR) is one of the most important instruments for balancing the international tax system. Its proper implementation strengthens trust between taxpayers and authorities, ensures documentary consistency, and reduces the risks associated with opaque tax structures.
In this context, multinational companies should consider CbCR not only as a formal obligation, but also as a strategic tool to demonstrate compliance, transparency, and global tax responsibility.
International transfer pricing and BEPS compliance advisory
At TPC Group, we provide comprehensive advice on transfer pricing, tax planning, and compliance with international standards, including the implementation and review of the Country-by-Country Report (CbCR). Our multidisciplinary team combines technical expertise, regulatory knowledge, and a strategic approach focused on transparency and tax efficiency.
With a presence in Latin America, the United States, and Spain, we support multinational groups and local companies in the preparation of technical documentation, risk analysis, master and local reporting, as well as in the alignment of transfer pricing policies with OECD guidelines and BEPS frameworks.
Source: OCDE