In light of the demand for increased international tax transparency, the Competent Authorities of the US and Germany have made a joint statement, concerning the exchange of CbC Reports with respect to fiscal years of MNE Groups commencing on or after January 1, 2018 and before January 1,2019.
The governments of the countries are negotiating on an intergovernmental agreement and a competent authority arrangement to allow for the automatic exchange of CbC Reports. However, the Competent Authorities do not want to wait for the negotiation’s conclusion and desire to spontaneously exchange CbC Reports.
The spontaneous exchange will be in accordance with Article 26 of the Convention between the governments of Germany and the US for ‘the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital and to Certain Other Taxes’. The exchange will also be subject to the confidentiality and other protections provided for in the Convention, including the provisions limiting the use of the information exchanged under the Convention. Both Competent Authorities recognise that the jurisdiction of the other Competent Authority has in place the appropriate safeguards with respect to confidentiality and use of information exchanged and the infrastructure for an effective exchange relationship.
Purpose of the exchange is to assessing high-level transfer pricing risks and other base erosion and profit shifting related risks, as well as performing economic and statistical analysis, where appropriate. Both Competent Authorities acknowledge that these are critical objectives of exchanging CbC Reports that should not be postponed.