An overview of country-by-country reporting : a local perspective

Abstract

Purpose: The study sets out to provide an overview of Country-by-Country reporting from a local vantage point. This relatively recent regulatory requirement in Maltese legislation has not been studied in detail yet. Therefore, the study investigates how Country-by-Country reporting is perceived in the local context in terms of its objective, implementation and impact. Design: The study’s objectives were achieved through a review of the relevant Maltese legislation and the available literature on the subject. 21 interviews were conducted with local tax practitioners, employees of local multinational enterprises and public officials working in the field of taxation at EU and local level. Findings: The findings point to a general agreement that Country-by-Country reporting enhances transparency for the tax authority, but has limited benefits for multinational enterprises despite the additional costs and burdens. The results show that Country-by-Country reporting was introduced adequately in domestic legislation. This said, a number of areas for improvement were identified. Conclusions: This study concludes that the enhanced transparency brought about by the introduction of Country-by-Country reporting will possibly have a positive impact on Malta’s reputation. This drive towards transparency can further benefit if the Country-by-Country report is accompanied by the corresponding master file and local file. However, it would be premature to impose further transfer pricing documentation requirements in Malta when no transfer pricing rules are in place. Finally, this study concludes that some of the local provisions on Country-by-Country reporting may be improved in Malta. Value: This study is the first to examine in depth the local regulatory framework for Country-by-Country reporting. Additionally, it is hoped that this study can assist in the enhancement of the relevant domestic – and possibly also global – legislation on Country-by-Country reporting. Recommendations include, but are not limited to, the review of the revenue threshold and the penalty regime, the publication of further guidance on Country-by-Country reporting, and eventually the introduction of requirements for the preparation and filing of the master file and the local file.