The IRS had issued final regs. on June 29, 2016 that require annual country-by-country (CbC) reporting by U.S. persons that are the ultimate parent entity of a multinational enterprise (MNE) group that has annual revenue for the preceding annual accounting period of $850 million or more. This information reporting requirement is satisfied by submitting the just released Form 8975, Country-by-Country Report, with an income tax return. TD 9773, 06/29/2016, Reg. § 1.6038-4
On June 29, the same day that IRS issued final Country-by-Country (CbC) reporting regs, the Organization for Economic Cooperation and Development (OECD) published guidance on the implementation of CbC reporting under Action 13 of the G20/OECD base erosion and profit shifting project. The guidance addresses issues arising due to the U.S.'s comparatively delayed implementation date for CbC reporting and specifically provides a voluntary, transitional filing optional called “parent surrogate filing.” OECD, “Guidance on the Implementation of Country-by-Country Reporting: BEPS Action 13” (June 29, 2016).
The Regulation § 1.6038-4(d)(1) says that the following information must be included on Form 8975 with respect to each constituent entity of the U.S. MNE group, as required:
- The complete legal name of the constituent entity.
- The tax jurisdiction, if any, in which the constituent entity is resident for tax purposes.
- The tax jurisdiction in which the constituent entity is organized or incorporated (if different from the tax jurisdiction of residence).
- The tax identification number, if any, used for the constituent entity by the tax administration of the constituent entity's tax jurisdiction of residence.
- The main business activity or activities of the constituent entity.
In addition, Form 8975 must contain the following information for each tax jurisdiction in which one or more constituent entities of a U.S. MNE group is resident, presented as an aggregate of the information for the constituent entities resident in each tax jurisdiction (Reg. § 1.6038-4(d)(2)) :
- Revenues generated from transactions with other constituent entities.
- Revenues not generated from transactions with other constituent entities.
- Profit or loss before income tax.
- Total income tax paid on a cash basis to all tax jurisdictions, and any taxes withheld on payments received by the constituent entities.
- Total accrued tax expense recorded on taxable profits or losses, reflecting only operations in the relevant annual period and excluding deferred taxes or provisions for uncertain tax liabilities.
- Stated capital, except that the stated capital of a PE must be reported in the tax jurisdiction of residence of the legal entity of which it is a PE unless there is a defined capital requirement in the PE tax jurisdiction for regulatory purposes.
- Total accumulated earnings, except that accumulated earnings of a PE must be reported by the legal entity of which it is a PE.
- Total number of employees on a full-time equivalent basis-see Reg. 1.6038-4(d)(3)(iii) for the treatment of independent contractors and other details.
- Net book value of tangible assets, which does not include cash or cash equivalents, intangibles, or financial assets.
The reporting period covered by IRS Form 8975 is the period of the ultimate parent entity's applicable financial statement prepared for the 12-month period (or a 52-53 week period described in Section 441(f)) that ends with or within the ultimate parent entity's tax year.
If the ultimate parent entity does not prepare an annual applicable financial statement, the reporting period covered by Form 8975 is the 12-month period (or a 52-53 week period described in Section 441(f)) that ends on the last day of the ultimate parent entity's tax year. (Reg. 1.6038-4(c)).
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