On February 23, 2017, the U.S. IRS published draft Instructions for Form 8975 and Schedule A (Form 8975), Country-by-Country Report (CbC Report). Note that these are in draft form and may change prior to the IRS issuing a final version. This document will be updated to address any changes.
A U.S. person must file a CbC Report if it is the ultimate parent entity of a U.S. multinational enterprise (MNE) group with revenues of USD 850 million or more in the immediately preceding reporting period. The first required reporting period for an ultimate parent entity is the 12-month reporting period that begins on or after the first day of a tax year of the ultimate parent entity that begins on or after June 30, 2016.**
These forms are used to report annually certain information with respect to the filer’s U.S. MNE group on a country-by-country basis. The filer must list the U.S. MNE group’s business entities, indicating each entity’s tax jurisdiction (if any), country of organization and main business activity, and provide financial and employee information for each tax jurisdiction in which the U.S. MNE does business. The financial information includes revenues, profits, income taxes paid and accrued, stated capital, accumulated earnings, and tangible assets other than cash.
Form 8975 is used to report information about the ultimate parent of a U.S. MNE group and Schedule A is used to report information about the constituent entities on a jurisdiction-by- jurisdiction basis. A constituent entity is an entity organized outside the U.S. that is consolidated with the U.S. MNE for GAAP purposes. In order to comply with the CbC requirements, both forms will have to be provided. Constituent entities of the U.S. MNE operating in multiple jurisdictions will need to multiple Schedules A (Form 8975).
The first required reporting period for an ultimate parent entity is the 12-month reporting period that begins on or after the first day of a tax year of the ultimate parent entity that begins on or after June 30, 2016. Taxpayers who need to file Form 8975 and Schedule A (Form 8975) for a period before the first required reporting period may file them with the income tax return for the tax year of the ultimate parent entity of the U.S. MNE group with or within which the early reporting period ends. It is important to note that in order for third country requirements to be met through voluntary CbC report filing in the U.S., a competent authority agreement for the automatic exchange of CbC reports must be in place. To date, no such agreements have been signed and for certain countries the required underlying exchange agreements (TIEA/Treaty) may not be in place or may not include the required language to provide for automatic exchange.
**In addition, U.S. affiliates of a non-U.S. MNE with revenues of EUR 750 million or more may be required to provide similar information to their MNE parent. This would be determined on the regulations in effect for the country where the non-U.S. MNE is resident. Constituent entities in this situation should contact their non-U.S. MNE to determine the appropriate reporting requirements.