Four CATA member countries are among the first 31 countries to formally sign the Multilateral Competent Authority Agreement for automatic exchange of country-by-country reports. The United Kingdom, Nigeria, Malaysia and South Africa recently endorsed the multilateral instrument that would see countries sharing critical information on multinational enterprises operating in their respective jurisdictions.
Country-by-country reporting is part of Action 13 under the G20-BEPS Action Plan that seeks to implement the new Transfer Pricing Reporting Standards. Lack of a framework for exchange of information has been a major limitation when conducting transfer pricing audits and the asymmetry of information between countries themselves and even between a country and the multinational enterprises, often results in improper allocation of profit between jurisdictions.
Under the new Transfer Pricing Reporting Standards, multinational enterprises are obliged to file country-by-country reports which will be shared by the jurisdictions that have signed in to the Multilateral Competent Authority Agreement, thereby enabling these jurisdictions to get complete information on the operations of the enterprises with respect particularly to where value is created and hence profit/loss allocation ought to be declared.
The Agreement, which will be a watershed in the field of transfer pricing audit, is a major boost to cross-border international tax cooperation and it is hoped that more countries will soon join in this initiative.