CbCR - Do Swedish MNEs need to think about "Secondary" filing?

Many Swedish MNEs are now getting ready to file their Country-by-Country report in Sweden by the end of the year, however, are they compliant in other countries?

Like many countries, Sweden has signed the Multilateral Competent Authority Agreement on the Exchange of CbC Reports (the "CbC MCAA"). The purpose of the CbC MCAA was to set the rules and procedures for Competent Authorities to automatically exchange CbC Reports on an annual basis with the tax authorities in which the MNE Group operates. However, each member is required to establish a bilateral relationship to activate the automatic exchange of information.

At the current stage, Sweden has only 29 bilateral activated relationships, according to the latest update by the OECD on October 2017. We have had discussions with the Ministry of Finance and the Swedish Tax Authority (“Skatteverket”) regarding the list of countries that Sweden wants to establish bilateral relationships within the framework of CbC MCAA. This list is now available on Skatteverket’s webpage. But in order for the bilateral relationship with Sweden to be established, the other countries on the list need to activate the relationship with Sweden precisely as Sweden has already done. Information regarding all activated bilateral relationships are available on the OECD webpage. We have been waiting patiently for this information to be updated by the OECD, however, according to Skatteverket, this information will be updated by mid-December and it is currently unclear to what extent this update will affect Sweden.

What should MNEs consider in this current situation?

MNEs should compare the list of countries that they operate in and check against the list of countries Sweden has activated bilateral relations or has the intention to activate bilateral relations. Currently, some countries have concluded bilateral relationships with 49 countries (again, Sweden currently only has 29 bilateral relationships).

Some jurisdictions are also continuing to work towards agreeing bilateral competent authority agreements for the automatic exchange of CbC Reports with specific partners under Double Tax Conventions (“DTC CAA”) or Tax Information Exchange Agreements (“TIEA CAA”). However, these agreements are also in the process of being updated to include the automatic exchange of information between the two jurisdictions. Due to the uncertainty, and considering that the next information update is expected mid-December, MNEs should have a plan B to consider secondary filing in countries with more bilateral relationships and/or local filing in countries with no bilateral relationships at all. This will ensure MNEs to be compliant so that the local competent authorities actually can receive the CbCR.

In other words, it is important for MNEs to make the analysis of which countries they operate in and compare it with the list of countries that are excluded from the information exchange. Please contact us for more information.