United States

IRS releases final country-by-country report and instructions

TAX ALERT  | 

The IRS recently published final versions of Form 8975, Country-by-Country Report, Schedule A thereto, and the accompanying instructions. Prior to this release, Form 8975, Schedule A, and the accompanying instructions were only available in draft versions.

Regulations issued by the IRS in June 2016 established the requirement for certain U.S. taxpayers that are the ultimate parent entities of U.S. multinational enterprise (MNE) groups to provide annual country-by-country (CbC) reports to the IRS. These CbC reporting requirements apply to U.S. parent companies of MNE groups with annual revenue of $850 million or more and require the U.S. parent company to report certain CbC information about the group’s global operations to the IRS, via Form 8975, for tax years starting on or after June 30, 2016.

Specifically, Form 8975 requires the disclosure of certain general information about the filer, such as legal name and employer identification number (EIN), as well as “any additional information related to the multinational enterprise group.” Examples of additional information that may need to be disclosed include information relating to the overall structure and operations of the group, or information about the overall assumptions or conventions used that could have an effect on the report.

Schedule A (Tax Jurisdiction and Constituent Entity Information) goes on to require the disclosure of information pertaining to the filer’s activities in the tax jurisdiction itself, such as revenue, profit, income tax paid, accumulated earnings and number of employees, as well as disclosure of the constituent entities within the jurisdiction. In addition, this schedule provides space for the taxpayer to disclose any additional information pertaining to the jurisdiction and constituent entities. It is key to note that a separate Schedule A is required to be attached to Form 8975 for each tax jurisdiction the MNE group operates in, including the United States. A Schedule A must also be filed to report stateless entities (constituent entities of the group with no tax jurisdiction of residence) and their information.

U.S. business entities subject to the CbC reporting requirements should take note of the release of the final form, and in particular the accompanying instructions, in order to prepare for the administrative requirements necessary for its completion. Even though the CbC requirement generally applies to tax years beginning on or after June 30, 2016, entities required to comply with the earlier CbC reporting requirement dates imposed by certain other tax jurisdictions may need to begin filing Form 8975 as early as Sept. 1 of this year.

For more on country-by-country reporting, see our articles, Frequently asked questions on country-by-country reporting and IRS alleviates foreign CbC requirements, allows early US filing.

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