Country-by-country reporting’s most common first-phase errors
In 2017, we repeatedly discussed the amendment to the Act on International Cooperation in Tax Administration introducing country-by-country reporting – CbCR. 31 October 2017 was an important date of the first phase of CbCR.
All Czech entities whose first reporting period ended before 31 October 2017 had to file a notification by 31 October 2017 informing the Specialised Financial Authority which company of a group of companies will submit a country-by-country report. This date is now behind us, and we can look back to see how Czech entities fared in fulfilling this duty.
According to information provided by the financial administration, a total of 3 500 notifications were filed as at 31 October 2017. The most common error was an incorrect form of submission: despite the fact that the only permitted method was an electronic filing via the EPO application, many entities submitted their notifications via their data boxes. The financial administration attempted to call the entities’ attention to these errors as quickly as possible so that they could rectify their situation and still file their notifications on time via the EPO application.
It is almost unbelievable how diverse and tricky situations in multinational groups of companies can be. In some cases, it was relatively hard to find the ultimate parent company; in other cases, it was difficult to initiate communication with group members unknown until that time. Consequently, the second most frequent error was an unclear identification of the reporting entity, i.e. the entity that should file a country-by-country report for the entire multinational group of companies. Although only one company – usually the ultimate parent – should be filing a country-by-country report for a group of companies, according to information from the received notifications, for some groups, CbCR would be filed by several entities at the same time.
Another very frequent mistake, caused by the failure to distinguish ohlášení (notification) from oznámení (country-by-country report) in Czech, was the incorrect notification of a Czech entity as the reporting entity.
Owing to the fact that CbCR is an entirely new duty for Czech taxpayers, the tax administrators decided to be relatively benevolent. Based on information received from the financial administration’s representatives, where the tax administrators identify faults that are described above or are of another nature, they will informally call the taxpayer to rectify the situation. If the taxpayer removes the error by the end of the calendar year, the tax authority will not penalise them for a late filing of a notification. Please note that the filing of a notification is a one-off duty, as opposed to the submission of country-by-country reports. A new notification must only be filed when the notified information changes. Consequently, notifications need not be filed every year.