The US publishes final country-by-country (CbC) reporting regulations on the same day that the OECD releases guidance for implementing CbC reporting.
In the U.S., CbC reporting requirements will apply to ultimate U.S.-based parent entities with annual revenue for the preceding year of USD $850 million or more for taxation years beginning on or after June 30, 2016. This implementation date leaves a filing gap for many entities (for example, those with a calendar year end), which may leave some multinational enterprises (MNE) with secondary or surrogate filing obligations in other countries for 2016.
The guidance released by the OECD includes discussions on "surrogacy reporting" under a secondary filing mechanism, it also includes guidance related to the issue of exchange rate fluctuations on the OECD's â‚ €750 million filing threshold for MNE groups.
Note that, while the 2016 federal budget confirmed Canada will implement country-by-country reporting, Finance has not yet released CbC draft legislation.
The draft U.S. regulations proposed to implement CbC reporting requirements for U.S.-based ultimate parents of MNEs with annual revenue for the preceding period of USD $850 million or more.
The final U.S. regulations make additional clarifying comments regarding:
Additionally, the U.S. regulations confirm that the IRS is committed to exchanging the CbC information with its treaty partners, once the systems and confidentiality safeguards in the other jurisdictions are taken into account.
Effective date and filing date
The U.S. CbC reporting requirements will apply to ultimate parent entities with taxation years beginning on or after June 30, 2016. In general, Form 8975 (the U.S. form used to carry out CbC reporting) must be filed with the ultimate parent entity's income tax return for the tax year in which the reporting period ends.
The effective filing date is later than that of many other jurisdictions around the world, including that proposed for Canada. For example, assuming that the effective date in Canada is as announced in the 2016 Budget, Canadian subsidiaries of U.S.-parented MNEs with a calendar year-end would have to file CbC reports with the CRA by December 31, 2017, while the U.S.-parent's filing requirement would not become due until sometime after that. To address this issue, the IRS and the U.S. Treasury have announced that they intend to allow ultimate parent entities of U.S. MNE groups to file CbC reports for reporting periods that begin on or after January 1, 2016. While the final U.S. regulations do not address voluntary filings for 2016, the preamble to the regulations state that such filings will be permitted and that Treasury will release further guidance at a later time. The preamble further indicates that the U.S. decided to wait for the OECD's guidance on voluntary filings to come out so as to ensure consistency (this OECD guidance was released shortly after the U.S. regulations on June 29, 2016). At this point, there is no indication as to when the IRS might release its additional CbC guidance or in what form it might take (e.g., as regulations, instructions to the 2016 CbC form, etc.)
For more information, contact your KPMG adviser.
Information is current to July 12, 2016.