CbC Reporting - New Guidance on Dividend Exclusions

The BEPS Action 13 report clarifies that dividends from other Constituent Entities are excluded from Revenue in Table 1 of a CbC report but leaves ambiguity around their inclusion in Profit (Loss) before Income Tax. This inconsistency has led to varied practices among jurisdictions and MNEs.

New guidance now specifies that, consistent with Revenue, Profit (Loss) before Income Tax should exclude payments treated as dividends in the payer’s tax jurisdiction. This ensures consistent treatment of these payments across jurisdictions:

• Payments classified as dividends in the payer’s jurisdiction are excluded from Revenue and Profit (Loss) before Income Tax in the recipient’s jurisdiction.

• Payments not classified as dividends (e.g., interest) in the payer’s jurisdiction are included in the recipient’s jurisdiction.

Inclusive Framework members are encouraged to apply this guidance promptly, with the mandatory application for fiscal years starting on or after January 1, 2025. Additionally, profits of another Constituent Entity included in profit before tax for financial reporting should be treated as dividends and excluded from Revenue and Profit (Loss) before Income Tax.

Make sure your organization is prepared for these changes. Consult with iVC's advisor.

Stay tuned for updates!