Two-thirds of companies globally are doing something proactive to prepare for the implementation of the OECD's Base Erosion and Profit-shifting (BEPS) initiative, according to a survey conducted by Thomson Reuters. This is an increase from 54 per cent in a survey in 2015.
Technology adoption for BEPS
The survey shows that companies are now more prepared for BEPS compliance and many are adopting technology to support this. Fifty-seven per cent of respondents now have a central database of important inter-company agreements and tax rulings to comply with the new BEPS Action 13 transfer pricing documentation requirements, while 60 per cent feel confident that their IT systems will be able to provide the necessary support for compliance of Action 13 reporting.
The survey report found there were several reasons for the increase in preparation for BEPS. It said: “Some companies are evaluating the tools they currently have and the processes they currently use, and are looking to bring new technology or services into the mix. Some have retained consulting firms that have expertise with BEPS compliance. Others, primarily multinationals based in Europe, are conducting BEPS transfer pricing reporting “trial runs” to determine their level of preparedness.”
Proactive approach - or wait and see?
Specifically, the 2016 Global BEPS Readiness Survey found that:
- 66 per cent are proactively taking steps based on the BEPS recommendations;
- 22 per cent are waiting for countries to implement;
- 7 per cent are waiting for all action points in the project to be finalised before acting;
- 3 per cent are waiting for peers to make a move; and
- 3 per cent are doing nothing.
The survey also found that companies are spending more time on BEPS compliance now than they were last year, with 71 per cent dedicating between two and 10 hours a week to the matter. Furthermore, most respondents (57 per cent) said the OECD’s BEPS recommendations have had no material impact on their accounting and financial reporting practices and only 30 per cent of respondents have referred to BEPS in communication with shareholders.
Transfer pricing documentation is biggest change
Transfer pricing documentation (BEPS Action 13) is creating the biggest change in corporate tax department – the survey found that 83 per cent said this is the biggest departmental change introduced by BEPS. The graph below shows the various BEPS actions and the level of change or concern that each action is causing.
The biggest issues resulting from BEPS Action 13 compliance were audit exposure (42 per cent), reconciliation (31 per cent), adjustments (15 per cent) and currency translation (7 per cent).
Six crucial questions for BEPS readiness
The report makes six recommendations for assessing a company's BEPS readiness:
- Can we thoroughly map out all legal entities included in our company (including permanent establishments [PEs] and branches), as well as their tax residence?
- How many full-time employees (FTEs) work in each jurisdiction, and what is the management structure for each legal entity in our group?
- Can we quickly gather and map entity-level financial data for each country we operate in? And how do we report the financials?
- Can we adequately describe our group’s global business operations and transfer pricing policies in a master file available to all relevant country tax administrations?
- Can we capture narrative and graphical information for each element of the local file contents, and can we easily and quickly upload content and attach relevant documents?
- Do we have the resources or data needed to support the transfer pricing analysis for each type of related-party transaction?
CTMfile take: this survey suggests that corporates are taking BEPS seriously and there has been an increase of preparation activity compared to last year. Of course, those who haven't yet taken action will need to do so soon. Listen to this useful WEBchat for more info about the impact of BEPS on corporate treasury and how to respond.
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