On December 21, 2015, the Internal Revenue Service (IRS) and the U.S. Treasury Department (Treasury) released proposed regulations (REG-109822-15) on country-by-country (CbC) reporting (the Proposed Regulations).
In general, the Proposed Regulations are modeled after, and are consistent with, the Organization for Economic Co-operation and Development (OECD) recommendations for CbC reporting, designed to combat base erosion and profit shifting.
Essentially, the Proposed Regulations will require U.S. persons that are the ultimate parent of a large multinational enterprise (MNE) group to report certain information including the amount of revenue, profit or loss, capital and accumulated earnings for each country of operation. For this purpose, a large MNE group would generally refer to an aggregate annual revenue of the group for the preceding annual accounting period of US$850,000,000 or more.
Included with the Proposed Regulations is a template for a form which is currently under development by the IRS, that is not officially numbered, referred to as “Form XXXX, Country-by-Country Report “ (the CbC Reporting Form).
If the Proposed Regulations are finalized in 2016, affected U.S. persons would generally be required to file the CbC Reporting Form as part of their timely filed 2017 tax return.
The IRS has asked for feedback from federal agencies like the Department of Defense to determine if there are national security implications from these CbC reporting requirements. In addition, the IRS is seeking comments from the public by March 22, 2016 to assist them in the determination as to which entities would qualify as U.S. parent organizations and would need to follow these rules.