US signs competent authority agreements with three new jurisdictions
TAX ALERT |
The IRS recently announced it has executed competent authority agreements with Iceland, South Africa and New Zealand to allow for the bilateral exchange of country-by-country (CbC) reporting information collected as part of the new Organisation for Economic Co-operation and Development (OECD) disclosure framework. This framework, known as Base Erosion and Profit Shifting (BEPS) Action Plan 13, requires multinational entities (MNEs) with annual revenue of $850 million or more to report certain financial information such as revenue, profit or loss and accumulated earnings, on a country-by-country basis. Prior to the execution of these agreements, the United States had only entered into competent authority agreements with Norway and the Netherlands.
In lieu of entering into the OECD’s multilateral agreement, a convention allowing jurisdictions to implement BEPS Action Plan items, the United States has instead elected to negotiate bilateral CbC competent authority agreements with jurisdictions independently. The United States CbC rules apply to U.S. MNEs for tax years beginning after June 30, 2016, and these agreements would allow U.S. MNEs to begin reporting CbC information to the IRS on the due date of their tax returns, including extensions.
The new agreements with Iceland, South Africa and New Zealand, in conjunction with the previously executed agreements with Norway and the Netherlands, bring the total number of bilateral exchange agreements to five. The IRS has also noted that it is actively engaged in the process of executing competent authority agreements with other jurisdictions. An up-to-date listing of all jurisdictions the United States has reached an agreement with can be found at the IRS CbC reporting webpage.
As CbC reporting phases in, it is important for U.S. MNEs to keep track of the jurisdictions in which the United States has executed bilateral competent authority agreements. MNEs are required to provide timely notice (along with certain specific information) to countries in which they have a constituent entity, and these agreements will affect the disclosures made in such notices.
For more on U.S. CbC reporting see our article, United States signs first CbC competent authority agreements.