Country-by-Country (CbC) reporting is a global initiative aimed at promoting tax transparency and combatting tax avoidance by multinational corporations (MNCs). CbC reporting requires MNCs to provide information about their operations, profits, taxes paid, and employees in each country where they operate. This article will provide an overview of CbC reporting in Georgia, including relevant laws and regulations and the data needed to understand the issue in the country.

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 combat tax avoidance by MNCs 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 Georgia

Georgia implemented CbC reporting as part of its tax legislation with the enactment of the Law on the Procedures of International Taxation in 2016. The law requires MNCs with consolidated revenue of GEL 750 million or more (approximately USD 230 million) to file a CbC report annually with the Georgian Revenue Service (GRS). The deadline for filing is the last day of the twelfth 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 Georgia or in other jurisdictions

The GRS 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 Georgia

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

• The Law on the Procedures of International Taxation was enacted in 2016
• The first CbC reports were due in 2018 for the 2017 fiscal year
• As of 2021, 48 MNCs have filed CbC reports with the GRS
• The total revenue reported by these MNCs was GEL 14.2 billion (approximately USD 4.3 billion)
• The total profit reported was GEL 1.5 billion (approximately USD 460 million)
• The total number of employees reported was 25,000
• The industries with the highest revenue were financial and insurance activities, manufacturing, and mining and quarrying
• The industries with the highest profits were financial and insurance activities, mining and quarrying, and transportation and storage

Conclusion

CbC reporting is an important tool for promoting transparency and tax fairness in MNCs. Georgia 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 are paying their fair share of taxes.