San Marino, despite being a small jurisdiction, is committed to global tax transparency and has aligned itself with international standards, including the OECD’s Base Erosion and Profit Shifting (BEPS) Action 13 initiative. The adoption of Country-by-Country Reporting (CbCR) obligations in San Marino reflects its effort to combat tax avoidance and ensure that multinational enterprises (MNEs) provide greater transparency regarding their global tax arrangements. This guide offers CFOs and financial executives a detailed understanding of the CbCR requirements in San Marino, including criteria for compliance, the submission process, penalties for non-compliance, and key resources to support adherence to the regulations.

Applicability of CbCR in San Marino

Criteria for Reporting:

• San Marino’s CbCR requirements apply to multinational enterprise (MNE) groups with consolidated annual revenues of at least €750 million in the previous fiscal year.
• The reporting obligation primarily rests on the ultimate parent entity of the MNE group, provided it is a tax resident in San Marino.
• If the ultimate parent entity is not based in San Marino, a constituent entity resident in San Marino may need to file a report if:
  • The parent entity’s jurisdiction does not require CbCR,
  • The parent entity’s jurisdiction does not have an information exchange agreement with San Marino, or
  • There has been a systemic failure in the parent entity’s jurisdiction regarding CbCR exchange.

Relevant Legislation:

• The legal framework for CbCR in San Marino is embedded within the 2019 Tax Law on International Cooperation and adheres to the OECD’s guidelines as part of the country’s participation in the BEPS Inclusive Framework.

Reporting Requirements

Information to be Reported:

• The CbC report must include the following data for each tax jurisdiction in which the MNE operates:
  • Total revenues (broken down into related-party and unrelated-party revenues)
  • Profit or loss before income tax
  • Income tax paid and accrued
  • Stated capital and accumulated earnings
  • Number of employees
  • Tangible assets (excluding cash or cash equivalents)
• A list of all constituent entities within the group must also be provided, with details on their respective tax residency and principal business activities.

Form and Submission:

• The CbC report must be submitted electronically and must conform to the OECD XML schema, which standardises reporting and enables automatic exchange with other jurisdictions.
• The report is filed with the Central Tax Office of San Marino, which is the designated authority responsible for monitoring CbCR compliance.
  • More information on the submission process can be accessed through the San Marino Central Tax Office website.

Filing Deadlines

• The CbC report must be submitted within 12 months following the end of the MNE group’s fiscal year. For example, for a fiscal year ending on 31 December 2023, the CbC report must be filed by 31 December 2024.
• Constituent entities in San Marino must notify the Central Tax Office about the identity of the reporting entity (whether it is the ultimate parent or a surrogate entity) no later than the last day of the reporting fiscal year.

Penalties for Non-Compliance

Penalties:

• Non-compliance with CbCR obligations in San Marino can result in significant penalties:
  • Failure to file the CbC report or delays in submission may lead to fines ranging from €5,000 to €50,000, depending on the severity of the breach.
  • Inaccurate or incomplete information in the CbC report can also attract penalties.
  • Failing to submit the notification on time or providing incorrect information can incur additional fines.

Defences:

• Entities may invoke a reasonable cause defence if they can demonstrate legitimate reasons for delays or inaccuracies, such as technical issues or unforeseen circumstances. However, the Central Tax Office will evaluate each case individually, and it is recommended to take all necessary steps to avoid penalties.

Confidentiality and Use of Information

Data Protection:

• The CbC reports submitted to San Marino’s tax authorities are treated with strict confidentiality and are primarily used for risk assessment, including the detection of transfer pricing risks and potential base erosion and profit shifting (BEPS) activities.
• San Marino is a signatory to the Multilateral Competent Authority Agreement (MCAA), allowing the automatic exchange of CbC reports with other participating jurisdictions. This agreement ensures that data protection standards align with those of the OECD.