Navarra, an autonomous region in Spain with its own fiscal autonomy, implements international tax regulations in line with the Organisation for Economic Co-operation and Development’s (OECD) Base Erosion and Profit Shifting (BEPS) Action Plan, specifically Action 13, which focuses on Country-by-Country Reporting (CbCR). The CbCR regime requires large multinational enterprise (MNE) groups to disclose detailed information about their global income, taxes paid, and economic activities in each jurisdiction. This guide provides key information for finance directors of multinational companies in Navarra, outlining the conditions for compliance with the CbCR requirements, reporting obligations, penalties for non-compliance, and additional resources.

Applicability of CbCR in Navarra

Criteria for Reporting:

• The CbCR requirement applies to multinational enterprise (MNE) groups that meet the following criteria:
  • 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 Navarra.
  • Constituent entities located in Navarra may also be required to submit the CbC report if:
    • The UPE’s jurisdiction does not have a CbCR requirement,
    • The UPE’s jurisdiction does not have an agreement with Spain or Navarra for the automatic exchange of CbC reports,
    • There has been a failure in the automatic exchange of the CbC report between the UPE’s jurisdiction and Spain.

Relevant Legislation:

• The CbCR framework in Navarra is governed by Foral Law 24/1996 as amended by subsequent regulations to align with the OECD’s BEPS Action 13. The local tax authority, the Hacienda Foral de Navarra (Navarra Tax Authority), is responsible for implementing and monitoring compliance with these regulations.

Reporting Requirements

Information to be Reported:

• The CbC report requires MNE groups to provide a detailed breakdown of financial and tax information for each entity within the group across all jurisdictions. This includes:
  • Total revenue (split into related and unrelated party revenue),
  • Profit or loss before income tax,
  • Income tax paid and accrued,
  • Capital and accumulated earnings,
  • Number of employees,
  • Tangible assets other than cash or equivalents.
• The report must also identify the constituent entities in the group, their tax jurisdictions, and the main business activities carried out by each.

Form and Submission:

• The CbC report must be filed electronically using the OECD’s XML schema format, ensuring compliance with international standards.
• In Navarra, the CbC report is submitted through the Hacienda Foral de Navarra’s electronic tax portal. For more information on electronic submission, visit: Hacienda Foral de Navarra – CbCR.

Filing Deadlines

• The CbC report must be filed within 12 months of the end of the MNE group’s fiscal year. For instance, if the group’s fiscal year ends on 31 December 2023, the CbC report must be submitted by 31 December 2024.
• Additionally, MNE groups with constituent entities in Navarra 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:

• Non-compliance with CbCR requirements in Navarra can result in significant fines, including:
  • A penalty of up to €250,000 for failure to submit the CbC report within the prescribed timeframe,
  • Penalties for failure to notify the tax authority of the reporting entity or for providing incomplete or inaccurate information,
  • Additional fines for intentional or repeated breaches of the CbCR regulations.

Defences:

• Companies may appeal penalties by demonstrating that non-compliance was due to reasonable cause, such as technical difficulties or unforeseen circumstances. However, businesses are expected to implement systems and processes to ensure compliance with the reporting obligations.

Confidentiality and Use of Information

Data Protection:

• The CbC reports filed in Navarra are subject to strict confidentiality rules. The information contained in the reports is used by the tax authority for risk assessment and audit purposes only.
• As part of Spain’s adherence to the OECD’s BEPS Action Plan, Navarra participates in the automatic exchange of information with other jurisdictions. The exchange of CbC reports is limited to jurisdictions that have appropriate agreements with Spain and meet the OECD’s confidentiality and data protection standards.