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Published on January 12, 2017
The Internal Revenue Service (IRS) released early drafts of Forms 8975 and 8975A on December 8, 2016 for public comment in advance of country-by-country (”CbC”) reporting requirements for certain U.S. multinational enterprise (”U.S. MNE”) groups beginning in 2017. The final regulations for CbC reporting, set forth in Treasury Regulation § 1.6038-4, were effective June 30, 2016. Note that draft forms released by the IRS are not considered final and will likely include changes before the release of final forms.
To align the United States with international efforts to combat base erosion and profit shifting (”BEPS”), § 1.6038-4 requires CbC reporting by certain United States persons that are the ultimate parent entity of a multinational enterprise group in IRS Tax Forms 8975 and 8975A (”Schedule A”). The CbC reporting requirements are based on the Organization for Economic Cooperation and Development (”OECD”)’s Action 13 Report "Transfer Pricing Documentation and Country-by-Country Reporting" designed to combat BEPS.
The reporting requirements outlined in § 1.6038-4 apply to U.S. MNE groups with annual revenue for the preceding annual accounting period of $850.0 million or more. Forms 8975 and 8975A are required to be filed with the ultimate parent entity’s income tax return. The reporting period covered by Form 8975 is the period of the ultimate parent entity's applicable financial statement prepared for the 12-month period that ends with or within the ultimate parent entity's taxable year. The CbC reporting requirements apply for taxable years that begin on or after June 30, 2016. All financial amounts reported are required to be in U.S. dollars.
Form 8975 requires information about the ultimate U.S. parent entity and Schedule A requires information on each consitituent entity. The draft form of Schedule A states that a separate form must be completed for each tax jurisdiction of the U.S. MNE group.
The contents of Form 8975 and the accompanying Schedule A include the following:
U.S. entities meeting the CbC reporting requirements should begin preparations in advance of the release of the final IRS forms to prepare for the filing of their fiscal 2016 tax returns. Rödl & Partner’s U.S. transfer pricing experts are available to assist clients in determining whether they meet CbC reporting requirements and if they are in compliance with U.S. transfer pricing rules.
Brad Pittman
Partner
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