Since more than 100 legal systems have committed to exchange information within the IRS, exchanges between legal systems are generally based on the multilateral convention on mutual tax assistance (convention), in which more than 100 jurisdictions participate, and the Multilateral Competent Authority`s (CRS MCAA) IRS Convention (CRS MCAA), which is based on Article 6. Legal systems can be based on a bilateral agreement, such as a double taxation agreement or an agreement on the exchange of tax information. In addition, some IRS exchanges will be organised on the basis of the relevant EU directive, agreements between the EU and third countries and bilateral agreements such as the agreements between the UK and the CDOT. The CRS MCAA provides details of the information that will be exchanged and when. It is a multilateral framework agreement. A specific bilateral relationship under the MCAA CRS only comes into force when the two jurisdictions have implemented the convention, submitted the necessary notifications in accordance with Section 7 and presented themselves to each other. The multilateral convention on mutual assistance in tax matters (the convention) obliges the competent authorities of the contracting parties to the Convention to agree on the scope of the automatic exchange of information and on the procedure to be followed. In this context, the CBC`s (CBC MCAA) multilateral agreement was developed on the basis of the agreement. In addition, two other agreements have been developed for the exchange of cbC reports, one for exchanges under double taxation agreements and the other for exchanges under tax information exchange agreements. In August 2020, more than 2,500 bilateral exchanges were activated for jurisdictions that committed to exchange CBC reports, and the first automatic exchange of CBC reports took place in June 2018. These include exchanges between the 88 signatory states of the EU Competent Authority Convention, the CNC, between EU member states under the 2016/881/EU Directive and between signatories to bilateral agreements to exchange exchange agreements of competent authorities under double taxation agreements or exchange of tax information, including 41 bilateral agreements with the United States.
Legal systems continue to negotiate CBC reporting agreements and the OECD will issue regular updates to clarify things for MNE groups and tax administrations. Country Reports: The Effective Tax Risk Assessment Manual helps countries make effective use of CBC reports by integrating them into a tax administration`s risk assessment process. The manual examines the benefits that cbC Reports can bring over other data sources for risk assessment, how CBC reports can be used by a tax authority to assess the risks of MNE groups, including some of the tax risk indicators that can be identified, a number of challenges that tax authorities may face in the use of CBC reports and how to process them, as well as other data sources that should be used with CBC reports, if available. With the implementation phase, some interpretation issues have emerged. In the interests of consistent implementation and security for both tax administrations and tax payers, the Inclusive Framework has issued guidelines to address some key issues. This guide is updated regularly.