Country-by-Country (CbC) reporting is an international initiative aimed at promoting tax transparency and fairness. It requires multinational corporations (MNCs) to disclose information on their operations, profits, taxes paid, and employees in every country where they operate. In Colombia, CbC reporting is mandatory for certain MNCs, and this article will explain how it works in the country, including relevant laws and regulations and the data needed to understand the issue in Colombia.

Background on CbC Reporting

CbC reporting was developed as part of the Base Erosion and Profit Shifting (BEPS) project launched by the Organisation for Economic Cooperation and Development (OECD) in 2013. The BEPS project aims to curb tax avoidance by multinational corporations by promoting greater transparency in international tax matters. By requiring MNCs to report their profits, taxes, and employees in each country of operation, tax authorities can better assess whether these companies are paying their fair share of taxes.

CbC Reporting in Colombia

Colombia implemented CbC reporting as part of its tax legislation with the enactment of Decree 1670 in 2017. The decree requires MNCs with consolidated gross revenue of COP 61,000 million or more (approximately USD 16 million) to file a CbC report annually with the Colombian tax authority. The deadline for filing is the last day of the sixth month following the end of the fiscal year.

The CbC report must contain the following information:

• The MNC’s revenue, profits, taxes paid, and taxes accrued
• The number of employees, broken down by full-time equivalents and part-time employees
• The MNC’s tangible assets, broken down by category
• The countries where the MNC operates, including the business activities conducted in each country
• Information on the MNC’s subsidiaries and entities that are tax residents in Colombia or in other jurisdictions

The Colombian tax authority uses the CbC report to assess whether MNCs are shifting profits to low-tax jurisdictions, as well as to identify potential transfer pricing issues. Transfer pricing rules ensure that prices charged by related parties are at arm’s length, meaning that they are similar to prices charged in transactions between unrelated parties. The CbC report provides authorities with insight into the operations of MNCs, enabling them to better understand the pricing of transactions between related parties.

Data on CbC Reporting in Colombia

The following data provides an overview of CbC reporting in Colombia:

• Decree 1670 came into effect in 2017
• The first CbC reports were due in 2018 for the 2017 fiscal year
• In 2019, 208 MNCs filed a CbC report with the Colombian tax authority
• The total revenue reported by these MNCs was COP 179,000 billion (approximately USD 47 billion)
• The total profit reported was COP 24,000 billion (approximately USD 6.3 billion)
• The total number of employees reported was 633,000
• The total taxes paid and accrued was COP 18,000 billion (approximately USD 4.7 billion)
• The industries with the highest revenue were mining and quarrying, wholesale and retail trade, and manufacturing
• The industries with the highest profits were mining and quarrying, financial and insurance activities, and manufacturing

Conclusion

CbC reporting is an essential tool for promoting transparency and tax fairness in multinational corporations. Colombia has implemented CbC reporting as part of its tax policy, requiring MNCs to report their operations, taxes paid, and employees in every country where they operate. The information provided in the CbC report is used by the tax authorities to identify potential transfer pricing issues and ensure that MNCs