Speaking to Accountants Daily, HLB Mann Judd tax partner Peter Bembrick said they have been inundated with Country-by-Country (CbC) requests in recent months, finding that some companies may unintentionally believe that they do not qualify for the CbC requirements.
According to the ATO, CbC applies to a significant global entity, if it is a global parent entity with annual global income of $1 billion or more, or a member of a group of entities consolidated (for accounting purposes), where the global parent entity has an annual global income of $1 billion or more.
“Traditionally we've had to answer if the company has an overseas parent on the ATO tax return but with the CbC, we've had to ask for the first time what is global turnover and we've had a couple of examples where they are on the borderline or the initial answer we got from their accounting team was that their turnover was $30-40 million so they did not qualify," said Mr Bembrick.
“But we drilled in further and found corporate charts provided by the group's auditors overseas, showing that we were only looking at one part of the chart, when in fact you're supposed to aggregate all the way up. When we drilled further up, it turned out that the group was over $1 billion.
“You got to be really careful with these companies and dig deeper and sometimes the locals might not even have that information and you have to approach head office.”
Further, Mr Bembrick believes that some companies may be led to believe they are not on the watch list because of the media’s portrayal of CbC and base erosion and profit shifting (BEPS) solely targeting large multinational firms.
“It's all about identifying what global companies are doing and all headlines are about Apple and Google but there's an awful lot of companies that are not household names but they still have over a $1 billion in turnover which is not that much at the global level,” said Mr Bembrick.
“Once you hit that threshold, the ATO wants visibility.
“It'll be interesting to see what happens when [authorities] share that information with each other, what comes out of that process, which could spark further investigation. Whether it actually achieves its objective by not actually catching companies but by stopping them from doing it in the first place.”
CbC reporting has been tripping up tax executives, with the former chair of Kreston Australia Tony Dormer finding that many clients aren’t prepared for the new deadlines despite penalties of over $500,000 being on the table.