USA: Final country-by-country reporting (CbCR) regulations

Published on July 25, 2016

The U.S. Treasury issued final regulations for country-by-country (CbC) reporting on June 29, 2016. The regulations, which were originally issued as proposed regulations in December 2015, require the filing of CbC reports on a newly designated Form 8975, ”Country-by-Country Report”, for tax years beginning on or after July 1, 2016. It was previously assumed based on the timing of the release of the proposed regulations that reporting would not apply to tax years beginning before January 1, 2017. The filing deadline for this new form will be the taxpayer’s tax return deadline as opposed to the full year allowed under the OECD’s report on BEPS Action 13 ("Re-examine transfer pricing documentation”).

Similar to the Action 13 requirements, the CbC rules outlined in Treasury Regulation § 1.6038-4 require jurisdiction by jurisdiction reporting of both related party and unrelated party revenue, pretax profit, income tax paid and accrued, stated capital, accumulated earnings, number of employees and tangible assets. Such reporting applies only to U.S. taxpayers who are the ultimate parent entity of a U.S. based multinational enterprise with annual consolidated group revenue of USD 850 million or more. The threshold of USD 850 million revenue was determined to be equivalent to the EUR 750 million threshold outlined in the Action 13 report.

The final regulations address some critical points including assuring taxpayers of Treasury’s intention to allow voluntary filing for years beginning before June 30, 2016 to address the ”gap year” problem as well as confirming that the information provided in CbC reports will be treated as tax return information subject to the confidentiality requirements outlined in Internal Revenue Code Section 6103.

While the regulations are generally consistent with OECD standards, there nonetheless remain technical uncertainties on various issues, which is inevitable given the fact that it would be essentially impossible for the OECD or any other jurisdiction to draft guidelines that would be uniformly applicable to all entities across all taxing jurisdictions. The regulations do however show a good faith effort by Treasury and the IRS to be in compliance with the OECD report on Action 13.