The Department of Treasury has announced that it plans to finalize its rules on country-by-country reporting by June 30, 2016 – just in time for U.S. companies with tax years beginning in the latter half of the year to start reporting.  Covered U.S. companies meeting the reporting threshold will have to start filing reports for tax years beginning after June 30th, including years beginning on July 1, 2016, and years beginning on September 1, 2016.

With the announcement came urging for other countries to be flexible in their local reporting requirements.  Many countries already have implemented country-by-country reporting.  Others, like the United States, have been slower to do so.  The effect of such staggered implementation for multinational corporations based is that, until their home countries begin to require reporting, their subsidiaries may be subject to local reporting requirements in other countries that have implemented reporting requirements.

Generally, country-by-country reporting obligations fall on parent companies in their country of residence, and not on subsidiary companies, but where a parent company’s home country does not require reporting, its subsidiaries can be required to file local reports in their countries of residence.  Because of this, the possibility that the United States would not have reporting requirements until 2017 had raised concern among U.S. multinational corporations that, during the “gap” period, their subsidiaries could be subject to myriad local reporting requirements in multiple jurisdictions.

Although the announcement of earlier implementation in the United States will help to curb the “gap” problem for U.S. multinationals, the issue remains.The United States is not the only country dealing with the issue of staggered implementation.  Canada has not yet passed any implementing legislation, and Japan will first start requiring reporting for tax years beginning on or after April 1, 2016.