Transfer Pricing News

The CbC Report & The Forgotten Table 3

The September 2014 Chapter V of the OECD Transfer Pricing Guidelines requires that a country-by-country report (CbCR) forms part of a large corporate’s transfer pricing documentation. Annex III of the new Chapter V contains the CbCR tables.

In Questro’s talks with a number of European corporates it regularly appears that the planning for the preparation of the CbCR does not include Table 3. Whilst the design of Table 1 and Table 2 makes it clear what content is required, the OECD has left Table 3 empty with a statement that taxpayers may include additional information to facilitate the understanding of the information included in the first two tables.

So what happened here? The fact that Table 3 is empty has caused many professionals to overlook the importance of Table 3. Also, some software solution providers have ignored the table and talk only about “the two tables” of the CbCR.

But Table 3 is important and reviewing Chapter V in detail reveals that mandatory information includes functional currency, exchange rates, information sources and additional details for the cases when the business activity description is Other. This sounds like another compliance burden but it isn’t: The bulk of it can be automated like Table 1 and Table 2. Otico Software’s TP Controller software is a good example.

Table 3 presents an opportunity for a corporate to include additional information that aides in providing a correct understanding of its global revenue and profit allocation. Examples of useful information could be:

  • an explanation of losses;
  • exceptional circumstances like a merger;
  • the introduction of new products that have caused IP owners to earn higher profits;
  • the introduction of competing products that have caused a decline in profit; or
  • an outline of the overall transfer pricing policy. 


Adding additional sections in Table 3 would allow tax administrations to get the right picture after the first read. The inclusion of additional sections can also be automated.

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