Signalling rules country-by-country reporting

Dutch Tax and Customs Administration

This page provides information on the algorithm 'Signalling rules country-by-country reporting'. This algorithm consists of signalling rules that support the employee in making trade-offs in supervision.

Last change on 23rd of September 2025, at 13:30 (CET) | Publication Standard 1.0

• Publication category: Impactful algorithms
• Impact assessment: Field not filled in.
• Status: In use

General information

Theme

Public finance

Begin date

07-2028

Contact information

[e-mail]

Link to publication website

https://over-ons.belastingdienst.nl/onderwerpen/omgaan-met-gegevens/algoritmeregister/

Link to source registration

https://over-ons.belastingdienst.nl/onderwerpen/omgaan-met-gegevens/algoritmeregister/signaleringsregels-country-by-country-reporting/

Responsible use

Goal and impact

From 1 January 2016, multinational groups with consolidated group sales of €750 million or more will be subject to a standardised documentation requirement: Country-by-Country reporting (CbCR) is the implementation of action point 13 of the OECD Base Erosion and Profit Shifting (BEPS) project.

CbCR is designed to enable risk analyses on transfer pricing risks and other risks related to land erosion. According to CbCR, the reporting entity of the multinational group must submit an annual country report to the tax authority in the country of its tax residence.

The algorithm has been developed to support staff in analysing country reports and enables efficient and effective corporate income tax (Vpb) supervision decision-making.

• What does the country report contain?

The country report provides an overview of the global distribution of income, taxes, number of employees and business activities by tax jurisdiction.

For the country report, the Organisation for Economic Cooperation and Development (OECD) has developed a template that the Netherlands also uses. The country report is automatically exchanged between the tax administrations of the different countries.

The Tax Administration receives more than 3,000 country reports every year. An algorithm has been developed for analysing the country reports. This algorithm supports the Tax Administration's staff in analysing the country reports and contributes to efficient and effective corporate income tax (Vpb) decision making.

The algorithm does not lead to a selection, but only highlights data from the country report that can help the staff member judge whether there is a high risk for one specific country report. Human intervention is always involved. The algorithm only aims to support employees in analysing the received country report. The algorithm has signalling rules to help detect possible base erosion and/or improper profit shifting.

Considerations

The algorithm was developed to support staff in analysing country reports. Country reports paint a complete picture of the multinational corporation to which a taxpayer belongs, which data does not follow from other Tax Administration systems. The algorithm completes and validates the taxpayer's employee picture. By deploying an algorithm, corporate income tax returns can be processed faster and more carefully. As a result, the Tax Administration's limited supervisory capacity can be better utilised. An additional advantage is that businesses get clarity faster.

The supervision of corporate income taxpayers is important for the Tax and Customs Administration. External stakeholders (politics, OECD / EU, NGOs) also expect the Tax Administration to use all the information at its disposal to detect and, where necessary, combat tax base erosion and/or improper profit shifting. The algorithm can support a Tax Administration employee in doing so, making the decision-making regarding deployment of supervisory capacity more careful, efficient and uniform.

Human intervention

Human intervention in the Tax Administration context implies that a competent and knowledgeable employee plays a substantial role in decision-making.

Human intervention is always involved in the operation of the algorithm. The algorithm only supports employees in assessing whether further investigation is needed into the transfer pricing used. It is always the Tax Administration employee who makes the decision.

Risk management

The General Administrative Law Act (Awb) requires the government's actions to be transparent and lawful. The Tax and Customs Administration observes the general principles of good governance when applying and developing algorithms.

The selection rules are reviewed periodically and adjusted if necessary to remain in compliance with laws and regulations.

Legal basis

1. General State Tax Act:
2. General Administrative Law Act:
3. Corporation Tax Act 1969:
4. Archives Act 1995:
5. International Tax Assistance Act (WIB).

Links to legal bases

• General State Tax Act:: https://wetten.overheid.nl/BWBR0002320/
• General Administrative Law Act:: https://wetten.overheid.nl/BWBR0005537/
• Corporation Tax Act 1969:: https://wetten.overheid.nl/BWBR0002672/
• Archives Act 1995:: https://wetten.overheid.nl/BWBR0007376/
• International Tax Assistance Act (ITC): https://wetten.overheid.nl/BWBR0003954

Elaboration on impact assessments

• Privacy and AVG

The use of data is tested against the General Data Protection Regulation (AVG). By testing personal data, any privacy risks come into focus and appropriate measures can be taken.

The CbCR algorithm is used exclusively for monitoring legal entities. No personal data are processed, therefore the General Data Protection Regulation (AVG) does not apply.

• Use of special personal data

Not applicable.

• Equality and non-discrimination

The CbCR algorithm is used exclusively for the supervision of legal persons. No personal data are processed when it is used.

Operations

Data

• Functional data (for example: currency, reporting year, indicators, business activities)
• Financial data (for example: profits, taxes, turnover, number of employees,
• Risks (e.g.: high profits per employee; low-tax states)

Links to data sources

• Functional data: Data uit de ontvangen landenrapporten.
• Financial data: Data uit de ontvangen landenrapporten.
• Risks: Data uit de ontvangen landenrapporten. Regeling laag belastende staten en niet-coöperatieve rechtsgebieden voor belastingdoeleinden

Technical design

The algorithm consists of signalling rules created by content experts based on expertise and laws and regulations.

The algorithm is only intended to support staff in analysing country reports. The signalling rules applied in the process serve only as an aid and are not used for selection. These rules are applied per country report, but do not lead to a subset of selected or unselected reports.

The actual selection is based on other sources of information, such as corporate tax returns, strategic treatment plans and other relevant data. The country report, including any identified risks, can then be used when assessing a return selected based on other sources.

In addition, Section 29f of the 1969 Corporation Tax Act explicitly states that signals from country reports may not be used independently as the basis for a tax assessment. Additional research is always required.

The algorithm is not self-learning. This means that the algorithm does not develop itself during its use.

External provider

The algorithm was developed by Tax Administration staff and is also maintained internally.