Country-by-Country Reporting (CbCR) is a fundamental aspect of international tax compliance for multinational enterprises (MNEs). In Germany, the Federal Central Tax Office (Bundeszentralamt für Steuern, BZSt) has implemented specific guidelines in accordance with the OECD’s Base Erosion and Profit Shifting (BEPS) Action 13. This article provides Chief Financial Officers (CFOs) and financial executives with a comprehensive understanding of the CbCR requirements in Germany, including applicability, filing procedures, and penalties for non-compliance.

Applicability of CbCR in Germany

Criteria for Reporting:

• MNE groups with consolidated group revenue of €750 million or more in the preceding fiscal year are required to submit a CbC report.
• The reporting entity is typically the ultimate parent entity of the MNE group that is a tax resident in Germany. In certain cases, surrogate parent entities or constituent entities may also be required to file.

Relevant Legislation:

• The primary legislative framework for CbCR in Germany is outlined in the Tax Act (Gewerbesteuergesetz, GewStG), specifically Section 138a of the Fiscal Code (Abgabenordnung, AO).

Reporting Requirements

Information to be Reported:

• The CbC report must include aggregate information relating to the global allocation of income, taxes paid, taxes accrued, stated capital, accumulated earnings, number of employees, and tangible assets other than cash or cash equivalents.
• It must also contain details of all the constituent entities for which financial information is reported, indicating the jurisdiction of tax residence of each entity and the main business activities.

Form and Submission:

• MNEs must complete and submit the CbC report using the specific German XML schema.
• The report should be filed electronically via the BZSt Online Portal (BOP).

Filing Deadlines

• The CbC report must be submitted within 12 months from the end of the reporting fiscal year. For instance, if the fiscal year ends on 31 December 2023, the report must be submitted by 31 December 2024.

Penalties for Non-Compliance

Penalties:

• Failure to file the CbC report by the deadline can result in a penalty of up to €10,000.
• Additional penalties may apply for inaccurate information, non-compliance, or failure to keep adequate records.

Defences:

• Entities may avoid penalties if they can demonstrate that there was a reasonable cause for the failure to comply.

Confidentiality and Use of Information

Data Protection:

• The information in the CbC report is treated as confidential and will only be exchanged with tax authorities in jurisdictions with which Germany has a competent authority agreement.
• The data is used to assess high-level transfer pricing and other BEPS-related risks.

Compliance with Country-by-Country Reporting requirements is essential for multinational enterprises operating in Germany. By understanding the criteria for applicability, the necessary information to be reported, and the deadlines for submission, MNEs can ensure they meet their obligations under German tax regulations. Failure to comply can result in significant penalties, making it crucial for CFOs and financial executives to stay informed and prepared.