United States

IRS alleviates foreign CbC requirements, allows early US filing

TAX ALERT  | 

By way of Rev. Proc. 2017-23, the IRS has now provided guidance on the process for the early filing of Form 8975, Country-by-Country (CbC) Report and its accompanying schedules, specifically, for reporting periods beginning on or after Jan. 1, 2016. Form 8975 is to be filed by the ultimate parent entities of U.S. multinational enterprise (MNE) groups exceeding $850 million in revenues for the preceding fiscal year.

While the U.S. CbC reporting regulations (section 1.6038-4) apply to reporting periods that begin on or after June 30, 2016, other tax jurisdictions have adopted CbC reporting requirements for accounting periods beginning on or after Jan. 1, 2016 (an early reporting period from a United States perspective). As a result, a foreign subsidiary that is owned by a U.S. parent and that is resident in a foreign jurisdiction would be required to file a CbC Report in that local jurisdiction because its parent does not have a requirement to file for this earlier annual accounting period. Given the later effective date of the U.S. CbC reporting requirements, Rev. Proc. 2017-23 resolves the timing difference with other countries’ filing date requirements and provides instructions on early CbC Report filing in the United States.   

An early U.S. CbC Report may be filed with the IRS beginning Sept. 1, 2017. That is, Form 8975 may be filed for an early reporting period with the income tax return for the taxable year of the ultimate parent entity of the U.S. MNE group. With this revenue procedure, the IRS is also allowing the filing of amended U.S. tax returns solely to attach Form 8975, within 12 months of the close of the taxable year that includes the early reporting period.

Once Form 8975 is filed, the IRS will engage in the automatic exchange of this information with other jurisdictions, and vice versa, as permitted under relevant tax treaties. This information sharing is consistent with and will facilitate the Organisation for Economic Co-Operation and Development’s Action Plan on Base Erosion and Profit Shifting.

Taxpayers should carefully assess the timing of CbC Report filing requirements as well as the administrative deadlines to file notifications required by certain countries pertaining to CbC reporting. Ideally, filing in the United States pursuant to this procedure will relieve taxpayers of having to file in other jurisdictions.

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