United States Final Country-by-Country Reporting Regulations Released (article)

United States Final Country-by-Country Reporting Regulations Released (article)

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On June 29, 2016, the Department of Treasury released the final regulations that require annual country-by-country reporting (CbCR) by certain U.S. persons. The final regulations affect any U.S. person that is the ultimate parent entity of a multinational enterprise (MNE) group with annual revenue for the preceding annual accounting period of at least $850 million. The ultimate parent entity will be required to submit a new reporting form, Form 8975, with its income tax return on or before the due date of the annual tax return.

The new CbCR requirements will apply for fiscal years beginning on or after June 30, 2016. In addition, voluntary filing of CbC reports will be allowed for U.S. MNE groups with fiscal years beginning before the effective date to enable compliance with the CbCR requirements already implemented in other countries. For this purpose, the Treasury Department is committed to entering into required bilateral competent authority arrangements for the exchange of CbCRs in a timely manner and will issue guidance for the voluntary filing in the future.

The final regulations state that the CbCR must be based on applicable financial statements, books and records, regulatory financial statements, or records used for tax reporting or internal management control purposes for an annual period of each constituent entity ending with or within the reporting period. The final regulations, however, do not require the ultimate parent entity to create and maintain records to reconcile the information reported in the CbCR to consolidated financial statements or to tax returns. This approach provides flexibility for U.S. MNE groups to use the available data for each constituent entity without imposing the potential burden of needing to reconcile information on the CbCR with accounts that may not even be finalized when the CbCR is compiled, and it is consistent with the Final Base Erosion and Profit Shifting (BEPS) Report.

In response to another important concern, the Treasury Department and the IRS have determined that the information provided on the CbCR is return information subject to the confidentiality protections of section 6103. This approach is consistent with the purpose of CbCR as well as the confidentiality standards reflected in the Final BEPS Report.

Finally, the definition of permanent establishment was changed in the final regulations to include:

  • A branch or business establishment of a constituent entity in a tax jurisdiction that is treated as a permanent establishment under an income tax convention to which that tax jurisdiction is a party;
  • A branch or business establishment of a constituent entity that is liable to tax in the tax jurisdiction in which it is located pursuant to the domestic law of such tax jurisdiction; or
  • A branch or business establishment of a constituent entity that is treated in the same manner for tax purposes as an entity separate from its owner by the owner’s tax jurisdiction of residence.

This approach is more consistent with the Final BEPS Report. Also, a U.S. MNE group that has already determined under applicable law whether it has a permanent establishment or a taxable business presence in a particular jurisdiction will generally not have to make a separate determination under the OECD Model Tax Convention solely for purposes of completing the CbC report. For more information, contact your local CBIZ MHM tax professional who will connect you with one of our international tax or transfer pricing specialists.


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United States Final Country-by-Country Reporting Regulations Released (article)The United States recently updated guidance that brings multinational enterprise group reporting into line with the Final Base Erosion and Profit Shifting (BEPS) Report....2016-07-18T12:21:00-05:00The United States recently updated guidance that brings multinational enterprise group reporting into line with the Final Base Erosion and Profit Shifting (BEPS) Report.