Araba, one of the three provinces in the Basque Country in Spain, has its own fiscal system, which operates under the local autonomy granted by Spanish law, while also adhering to international tax transparency standards such as the OECD’s Base Erosion and Profit Shifting (BEPS) Action 13. This regulation includes the Country-by-Country Reporting (CbCR) regime, aimed at ensuring that multinational enterprises (MNEs) provide detailed information on their global activities, income, and taxes paid in each jurisdiction. This guide is intended to help finance directors of MNEs operating in or through Araba understand whether they are affected by the CbCR requirements, how to comply, penalties for non-compliance, and where to find additional resources.

Applicability of CbCR in Araba

Criteria for Reporting:

• CbCR obligations apply to multinational enterprise (MNE) groups operating in Araba that meet the following thresholds:
  • The MNE group’s consolidated revenue exceeds €750 million in the preceding fiscal year.
  • The ultimate parent entity (UPE) of the group is a tax resident in Araba.
  • A constituent entity in Araba may be required to submit the CbC report if:
    • The UPE is located in a jurisdiction that does not require CbCR,
    • The jurisdiction of the UPE does not have an agreement with Spain or Araba for the automatic exchange of CbCR reports,
    • There has been a failure to exchange the CbCR report with Spain or Araba.

Relevant Legislation:

• The CbCR regime in Araba is governed by Foral Regulation 2/2016, which aligns with the OECD’s BEPS Action 13. The local tax authority responsible for the administration of this regulation is the Arabako Foru Ogasuna (Araba Tax Authority).

Reporting Requirements

Information to be Reported:

• The CbC report must include detailed financial and tax-related information for each constituent entity of the MNE group, broken down by tax jurisdiction. The required data includes:
  • Total revenue, split between related and unrelated parties,
  • Profit or loss before income tax,
  • Income tax paid and accrued,
  • Stated capital,
  • Accumulated earnings,
  • Number of employees,
  • Tangible assets, excluding cash and equivalents.
• Additionally, the report must include a list of all constituent entities within the group, their jurisdiction of tax residence, and a description of their main business activities.

Form and Submission:

• The CbC report must be submitted electronically in the OECD XML schema format, which is standardised for international compliance.
• In Araba, the report is submitted through the local tax authority’s online portal, Arabako Foru Ogasuna’s electronic filing system, which facilitates secure transmission and processing of the report. For more information, visit the official site: Arabako Foru Ogasuna – CbCR.

Filing Deadlines

• The CbC report must be filed within 12 months of the end of the fiscal year of the MNE group. For example, if the group’s fiscal year ends on 31 December 2023, the CbC report must be filed by 31 December 2024.
• Additionally, any constituent entity based in Araba must notify the tax authority of the identity of the reporting entity (whether it is the UPE or a surrogate parent entity) before the end of the fiscal year.

Penalties for Non-Compliance

Penalties:

• Araba imposes strict penalties for non-compliance with CbCR requirements. These include:
  • Fines of up to €250,000 for failure to submit the CbC report within the specified deadline.
  • Fines for failure to notify the tax authority of the reporting entity’s identity or for submitting inaccurate or incomplete information.
  • Additional penalties may be imposed in cases of persistent non-compliance or if false information is provided deliberately.

Defences:

• Multinational groups may appeal or defend against penalties if they can demonstrate reasonable cause for the failure, such as technical difficulties or extraordinary circumstances beyond their control. However, companies are expected to have sufficient processes and systems in place to meet compliance deadlines.

Confidentiality and Use of Information

Data Protection:

• The CbC reports filed in Araba are considered confidential and are used solely for risk assessment and tax audit purposes by the tax authority.
• As part of Spain, Araba participates in the automatic exchange of information with other jurisdictions that have signed agreements under the OECD’s BEPS framework. This ensures that data is only shared with tax authorities that meet strict confidentiality standards.