IRS Issues Final Regulations on Country by Country Reporting

Regulations Require Annual country-by-country (CbC) reporting by U.S. persons.

The IRS has has issued final regulations that require country-by-country reporting by U.S. persons that are the ultimate parent entity of a multi-national enterprise (MNE) group that has annual revenue for the preceding annual accounting period of $850 or more.  This information reporting requirement will be satisfied by submitting form 8975, a new form that has yet to be released.

The reporting period covered by Form 8975 is the period of the ultimate parent entity’s annual applicable financial statement that ends with or within the ultimate parent entity’s tax year, or, if the ultimate parent entity doesn’t prepare an annual applicable financial statement, then the ultimate parent entity’s tax year. All amounts reported must generally be in U.S. dollars; if an exchange rate is used other than in accordance with U.S. generally accepted accounting principles (GAAP) for conversion to U.S. dollars the exchange rate must be indicated.

The final regs do not limit the constituent entity information to applicable financial statements of the constituent entity but, rather, provide that the source of the tax jurisdiction of residence information must be based on applicable financial statements, books and records, regulatory financial statements, or records used for tax reporting or internal management control purposes for an annual period of each constituent entity ending with or within the reporting period.

Form 8975 must be filed with the ultimate parent entity’s income tax return for the tax year, in or with which the reporting period ends, on or before the due date (including extensions) for filing that person’s income tax return (or as otherwise prescribed by Form 8975). While the final regs do not require the ultimate parent entity to create and maintain records to reconcile the information reported in Form 8975 to consolidated financial statements or to tax returns, the ultimate parent must maintain records to support the information provided in Form 8975.