United States

Country-by-country reporting may be required before year-end

TAX ALERT  | 

One of the key action items arising out of the Organisation for Economic Co-operation and Development’s (OECD) Base Erosion and Profit Shifting (BEPS) Action Plan, was the development of Action Item 13, Guidance on the Implementation of Transfer Pricing Documentation and Country-by-Country (CbC) Reporting. Many countries have adopted some variation of the recommendations set forth in Action 13, specifically CbC reporting with an effective date of Jan. 1, 2016, for calendar year taxpayers with revenues exceeding €750m. This means that calendar year 2016 will be the first year many multi-national entities (MNEs) will be required to collect, compile and report CbC data for the MNE group.

Noticeably absent in the list of countries requiring CbC for calendar year 2016 is the United States. However, in the preamble to the final regulations requiring CbC reporting, the U.S. Treasury indicated that early adoption for calendar year 2016 will be available for U.S. taxpayers, though the necessary guidance as to the procedures have yet to be released.

In most circumstances, CbC filing will be completed and lodged in the parent company’s tax jurisdiction. In situations where the home country has signed the Multilateral Instrument, or another information sharing agreement, most countries will not require separate CbC to be filed in other jurisdictions, though certain countries do require notification of where CbC data will be filed.

Of significant importance in the final weeks of 2016 are the countries where notification is required to be filed during the current and future tax years of the reporting entity. As of Dec. 19, 2016, a number of countries require notification by Dec. 31, 2016, as to where the CbC data will be filed:

  • Austria – Notification as to the identity of the entity filing the CbC data for the group must be made by Dec. 31, 2016, for calendar year entities.
  • Denmark – Notification as to the identity of the entity (including name, address and local country tax ID number) filing the CbC data must be made by Dec. 31, 2016, for calendar year entities.
  • Ireland – Notification as to the identity of the entity filing the CbC data must be made by the end of the tax year in question and must be made via electronic submission with the tax authority’s Revenue Online Service (ROS) by Dec. 31, 2016, for calendar year entities.
  • Spain – Notification as to the identity of the entity filing the CbC data must be made by Dec. 31, 2016, for calendar year entities.

Additional countries have draft legislation, which may or may not require notification of where CbC data will be filed upon finalization. Others have had a notification requirement before year-end, but ultimately chose to delay the notification until a future date to allow for proper procedures and planning:

  • Belgium – Notification as to the identity of the entity filing the CbC data must be made by Sept. 30, 2017, for calendar year entities for the 2016 tax year, in future years, notification will be required by the final day of the tax year.
  • Japan – Notification as to the identity of the entity filing the CbC data for the group must be made by the last day of the ultimate parent’s tax year, for tax years beginning on or after April 1, 2016, i.e., notification is not required for calendar year taxpayers until Dec. 31, 2017.
  • Netherlands – Notification as to the identity of the entity filing the CbC data must be made by Sept. 1, 2017, for calendar year entities for the 2016 tax year, in future years notification will be required by the final day of the tax year.
  • Poland – Notification as to the identity of the entity filing the CbC data must be made by Oct. 31, 2017, for calendar year entities for the 2016 tax year, in future years notification will be required by the final day of the tax year.
  • Portugal – Notification as to the identity of the entity filing the CbC data must be made by May 31, 2017, for calendar year entities for the 2016 tax year, in future years notification will be required by the final day of the tax year.

As BEPS legislation evolves, MNEs should be ready to respond to the countries that have implemented reporting requirements for calendar year 2016. For more information on the CbC reporting, see our article, Frequently asked questions on country-by-country reporting.

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