The IRS has new guidance on filing country-by-country reports for early reporting periods.
The guidance, issued as Revenue Procedure 2017-23, describes the process for filing the U.S. Form 8975 Country-by-Country Report (and accompanying schedules) by ultimate parent entities of U.S. multinational (MNE) groups for reporting periods beginning on or after January 1, 2016, rather than for the periods beginning on or after June 30, 2016, as required by U.S. regulations.
The United States published its final country-by-country reporting regulations in June 2016. In the United States, country-by-country 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) because the reporting period in many countries starts as early as January 1, 2016. This may leave some multinational enterprises (MNE) with secondary or surrogate filing obligations in other countries. Under the surrogate mechanism, the U.S. ultimate parent would designate one of its entities to be a "surrogate" for filing purposes. The surrogate would file the country-by-country report on behalf of the multinational group.
The IRS and Treasury announced that they would allow U.S. parent entities to file reports for reporting periods that begin on or after January 1, 2016. This early filing policy would allow U.S.-based MNEs with a calendar year-end that were considering designating a surrogate parent for filing purposes to avoid having filing requirements imposed on multiple entities in multiple jurisdictions.
According to the guidance in Rev. Proc. 2017-23, beginning on September 1, 2017, Form 8975, "Country-by-Country Report" may be filed for an early reporting period with the income tax return or other return (as provided in the Instructions to Form 8975) for the taxation year within which the early reporting period ends.
The guidance provides that, to file Form 8975 for an early reporting period, an ultimate parent entity must file an amended income tax return, with the form attached, within 12 months of the end of the tax year that includes the early reporting period. The guidance notes that filing an amended income tax return solely to attach Form 8975 will have no affect the statute of limitations for the return.
The guidance encourages ultimate parent entities to file returns and Form 8975 electronically, where possible. Electronic filing of Form 8975 must be in Extensible Markup Language (XML) format, not as a binary attachment (i.e., a PDF file). Form 8975 is expected to be included in tax preparation software ahead of the September 1, 2017 implementation date. Draft paper copies of Form 8975 and the accompanying schedule A are currently available, but draft instructions for Form 8975 have not been released.
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Information is current to February 21, 2017. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500