Bizkaia, one of Spain’s historical territories within the Basque Country, has its own tax system distinct from the rest of Spain, although aligned with national and international regulations. The territory is committed to the OECD’s Base Erosion and Profit Shifting (BEPS) Action 13, aimed at promoting transparency through Country-by-Country Reporting (CbCR) for multinational enterprise (MNE) groups. The objective is to ensure that MNEs pay taxes where their economic activities are conducted and where value is created. This guide outlines the CbCR obligations for companies based in or operating through Bizkaia, detailing who is affected, how to comply, penalties for non-compliance, and other essential aspects of the regulation.

Applicability of CbCR in Bizkaia

Criteria for Reporting:

• CbCR obligations apply to multinational enterprise (MNE) groups operating in Bizkaia if they meet the following criteria:
  • The MNE group’s consolidated revenue in the preceding fiscal year exceeds €750 million.
  • The ultimate parent entity (UPE) of the MNE group is a tax resident in Bizkaia.
  • In some cases, a Bizkaian subsidiary or constituent entity of an MNE group may also need to submit the CbC report if:
    • The UPE is based in a jurisdiction that does not require CbCR,
    • The UPE’s jurisdiction does not have an automatic exchange of CbC reports with Spain or Bizkaia,
    • There has been a failure in the exchange of CbC reports between Bizkaia and the UPE’s jurisdiction.

Relevant Legislation:

• The legal framework governing CbCR in Bizkaia is laid out in Foral Regulation 2/2016 of 7 June. This regulation is aligned with the OECD’s BEPS Action 13 and ensures that tax authorities in Bizkaia follow international standards.

Reporting Requirements

Information to be Reported:

• MNE groups required to submit a CbC report must provide detailed financial and tax-related information for each entity in the group, broken down by jurisdiction. The report 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).
• In addition, the report must include a list of all the constituent entities of the MNE group, their jurisdiction of tax residence, and the nature of their main business activities.

Form and Submission:

• The CbC report must be submitted electronically using the OECD’s XML schema format, which ensures compatibility with international data standards.
• In Bizkaia, the report is filed through the Bizkaian Tax Authorities’ electronic system, known as BizkaiBai. For more details on the submission process, visit the official website: Bizkaiko Foru Ogasuna – CbCR.

Filing Deadlines

• The CbC report must be submitted within 12 months after the last day of the fiscal year of the MNE group. For instance, if the fiscal year ends on 31 December 2023, the report must be submitted by 31 December 2024.
• Any Bizkaian subsidiary or constituent entity of an MNE group must also notify the tax authorities about the identity of the reporting entity (either the UPE or a surrogate parent entity) before the end of the fiscal year.

Penalties for Non-Compliance

Penalties:

• Bizkaia imposes penalties for non-compliance with CbCR obligations, including:
  • A fine of up to €250,000 for failure to submit the CbC report within the required timeframe.
  • Additional fines may be imposed for failure to notify the authorities of the reporting entity’s identity or for providing inaccurate or incomplete information in the report.
  • Continued or serious violations can result in higher fines, depending on the severity of the infraction.

Defences:

• MNEs may be able to defend against penalties if they can demonstrate reasonable cause, such as technical problems or extraordinary circumstances. However, businesses are expected to take all necessary measures to comply with the filing requirements in a timely manner.

Confidentiality and Use of Information

Data Protection:

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