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What is actually happening with Country-by-Country (CbC) reports?

Tax Alert - October 2025

One of the key goals of the OECD’s Base Erosion and Profit Shifting (BEPS) project was establishing greater transparency for all large multinational enterprise groups. The BEPS Action 13 Report established a template for large multinationals to use for annual reporting, including details of the jurisdictions in which they operate, along with a range of financial, tax and business information. The resulting Country-by-Country (CbC) reports are intended to be submitted by the ultimate parent entity, and automatically shared with tax authorities in the jurisdiction where the large multinational operates.  It is noteworthy that the use of the CbC reports has recently been expanded to support the Pillar Two regime and provide data from which the safe harbours may be calculated.

Jurisdictions that signed up to the OECD Inclusive Framework are subject to a peer review of their implementation of the legal and administrative framework.  The OECD’s recently released peer review report (the eighth report) shows that New Zealand is among the 120 jurisdictions that has the required domestic legal framework in place for the CbC reports. New Zealand also meets the other requirements for an exchange of information framework (101 jurisdictions), confidentiality (107 jurisdictions), and has evidence to show that measures are in place to ensure appropriate use of the CbC reports (89 jurisdictions). The peer review is an annual process as new jurisdictions join the Inclusive Framework and jurisdictions look to address outstanding issues. If you are interested to check whether a particular jurisdiction has met the requirements, you can find the OECD report here.

The question has always been what Inland Revenue and other tax authorities do when a multinational’s CbC report is provided and information is exchanged.  In New Zealand we have not seen specific CbC report issues raised as part of Inland Revenue risk reviews, and historically the receipt of the information from other tax administrations was barely recognised. In recent discussions, Inland Revenue confirmed that it receives approximately 1,500 CbC reports through exchange of information arrangements. These reports end up with the International Revenue Strategy (IRS) team at Inland Revenue and the information is incorporated into its taxpayer risk rating models, helping Inland Revenue to assign a high, medium or low risk rating to the multinational’s subsidiaries. These ratings are supplemented by a wide range of other information gathered by the IRS team, including the annual International Questionnaires for taxpayers with over NZD30 million of revenue, information provided through the Basic Compliance Package and financial statements. This is a multiyear and ongoing process, with information across the years building a picture of the base erosion risk to New Zealand tax base.

Inland Revenue continues to step up its risk review and audit activity (with increased funding provided by the government), and transfer pricing hasn’t been left behind. The number of transfer pricing case leads and technical specialists at Inland Revenue has doubled over the past two years, and we expect that the increasingly sophisticated taxpayer risk ratings will facilitate more targeted reviews and audits. For the large multinational taxpayers, i.e. those impacted by the CbC report requirements, it is also important to remember the special powers that Inland Revenue has been granted to request and obtain information held offshore by the groups, and the deemed Permanent Establishments rules – streamlining some of the challenges that were previously seen when auditing subsidiaries of large multinational taxpayers.  Although we have not yet seen significant audit activity in from the increased transparency of the CbC reports, the time may be coming where the effect of the cumulative data from the CbC reports influences risk ratings and audit actions for some of the entities otherwise flying below the radar.

If you have any questions about CbC reporting, BEPS or transfer pricing, please contact your usual Deloitte advisor.

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