Which entity in the group files the country-by-country report?
The report is a group-level document, so it is filed once by the entity at the top of the group rather than by each subsidiary. Where the parent's jurisdiction cannot or does not exchange the report with a country the group operates in, that country can require it from a local entity instead, or accept it from a designated substitute filer elsewhere in the group. There is usually a separate step before the report itself: telling each relevant jurisdiction which entity will file and where, on that jurisdiction's own timetable. Groups miss the notification far more often than they miss the report, because it looks administrative and it is not.
What information actually goes in a country-by-country report?
A template rather than a narrative. For each jurisdiction the group operates in it sets out revenue, profit, tax, employee numbers and tangible assets, with related-party and unrelated revenue distinguished. There is no room to explain anything, which is the characteristic that causes most of the trouble. Two decisions matter more than the arithmetic: which source the figures come from — statutory accounts, consolidation data, management reporting — and then applying that one source consistently, year to year and country to country. A change of source between years reads as a change in the business, and you will be asked about it before anyone finds the note explaining it.
Is our group big enough to have to file one?
It depends on a consolidated group revenue threshold, tested on the group's accounts for the preceding year. We will not quote the figure here, because the threshold is fixed in one currency and each country applies its own equivalent, so the number that matters is the one in the legislation of the parent's jurisdiction for the year being tested. Two practical points follow. A group that crosses the threshold in one year can be reporting for the next, so the test is worth running annually rather than once. And notification duties can attach to entities in countries where the group's presence is very small.
Why does our report show so little tax in one country?
Usually because the template asks for two things that do not line up. Tax figures are reported on bases that mix what was paid in the year with what was accrued for it, so timing alone produces a mismatch against the profit shown on the same line. Then add losses carried forward from earlier years, a one-off gain booked in a holding entity, or an intercompany charge that moved profit between lines. None of that is wrong, and none of it is visible in the template. The place to answer the question is the local documentation, prepared in advance, so the explanation is contemporaneous rather than retrospective.
Can country-by-country reporting alone trigger a transfer pricing adjustment?
Not by itself. It is a risk-assessment tool: it shows an authority where in the group the profit, the people and the tax sit relative to each other, and therefore where to look. An adjustment comes from the analysis that follows — the functional analysis, the comparables, the intercompany agreements. What the report changes is the likelihood and the starting point of that enquiry. So read your own template the way a reviewer will before it is filed, and identify the jurisdictions where the relationship between profit and substance looks odd. Those are the local files that should be complete.
What if our local file contradicts the country-by-country figures?
The comparison is the point of the exercise, so the contradiction will be found. A typical version: the local documentation describes an entity as a routine distributor bearing little risk, while the template shows a share of group profit no routine distributor would earn. Sometimes the documentation is wrong, sometimes the template is, and sometimes both are right and the difference has a mundane cause such as a rebate or a management charge booked in one place. Reconcile them before filing, in writing, and keep the reconciliation with the file. An explanation produced long afterwards carries far less weight.
What is the arm's length principle?
The standard that a transaction between related parties should be priced as it would have been between independent ones dealing at arm's length. It is the test every major transfer pricing regime applies, and it is evidenced by comparison — finding independent transactions or companies genuinely similar in function, risk and assets, then showing your pricing falls within the range they produce. That comparison is what a benchmarking study documents. See benchmarking study.
How would a foreign tax authority know I am resident there?
Mostly from information you or your bank already provided. Account-opening forms ask you to self-certify tax residence, and that certification is reported between authorities under the Common Reporting Standard or, for US accounts, under the FATCA framework. Beyond that: employer and payroll filings, property registries, immigration records and the tax filings of anyone who paid you. The realistic planning assumption is that the data arrives. See FATCA and information reporting.
