United States

IRS answers common questions regarding country-by-country report

IRS FAQs indicate potential uses of country-by-country reporting

TAX ALERT  | 

In addition to final versions of Form 8975, Schedule A thereto, and their accompanying instructions, the IRS recently published frequently asked questions (FAQs) regarding the new U.S. country-by-country (CbC) reporting standards. The questions are divided into four sections (outlined below) and will be continually updated as additional information or new guidance becomes available.

General questions

The general questions section describes the origin and purpose of CbC reporting and provides links to additional guidance and resources. It also outlines the need for either of the following to be in place between the United States and an identified tax jurisdiction before CbC information can be exchanged:  a legal instrument allowing for the exchange of information (a double taxation convention or DTC); or a tax information exchange agreement (TIEA) and a competent authority arrangement (CAA) for the exchange of CbC reports.

Data format and structure

The data format and structure section outlines the schema needed for electronic filing of Form 8975. Perhaps most importantly, the section indicates the IRS will use the approved Organisation for Economic Cooperation and Development (OECD) CbC XML schema with partner jurisdictions under either a DTC or a TEIA and a CAA. Paper returns will be accepted as well, however, ultimate parent entities are encouraged to file electronically.

Exchange of information

The exchange of information section is, perhaps, the most informative FAQ section as it describes how the IRS may use CbC data and demonstrates a strong commitment to the OECD’s CbC guidance. The section also provides a useful link to current countries with whom the United States has signed CAAs and the date the IRS intends to begin exchanging information (no later than June 2018).

Reporting requirements

The final FAQ section covers certain reporting requirements for CbC filings, including the first accepted filing date (beginning on Sept. 1, 2017), surrogate filing opportunities (when certain conditions are met and filings are required ahead of the first accepted filing date), and other specific reporting accommodations. For instance, a foreign jurisdiction cannot require local CbC filing if it does not meet the standards of confidentiality, consistency, and appropriate use described in the OECD guidance. Hence, if a U.S. company determines it does not meet the CbC reporting threshold of U.S. regulations, a foreign jurisdiction cannot require that a local subsidiary of the U.S. company file a CbC report merely because the U.S. company group exceeds the revenue threshold in the foreign jurisdiction.

Taxpayers should review the FAQs now and refer to them as they begin to file CbC reports.


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