IRS may accept early country-by-country reports

Tax Hot Topics - IRS may accept early country-by-country reportsRobert Stack, deputy assistant secretary, International Tax Affairs at the Department of Treasury, recently said that the IRS is working to accept voluntary country-by-country (CbC) reports for the 2016 tax year. His spoke  at a transfer pricing symposium held at the University of San Diego School of Law and sponsored by Grant Thornton LLP.  

Stack previously announced that Treasury expects to issue final regulations requiring CbC reporting by June 30. This raised concerns for many taxpayers, because the Organisation for Economic Cooperation and Development (OECD) set standards recommending that jurisdictions implement requirements starting in 2016, and for most taxpayers, the U.S. regulations would not be effective until 2017. Many of these jurisdictions require local reporting if the parent entity’s jurisdiction does not require CbC reporting, effectively creating what some have called a “gap year.” Without a voluntary submission alternative, many U.S. multinationals would be forced to comply with CbC requirements at various local levels during this gap year.

Stack said the IRS and Treasury want to move toward permitting voluntary submissions for the 2016 year. However, Stack cautioned that “there’s no victory in accepting voluntary filings if the other countries that are partners in the country-by-country plan are not going to accept them as good filings, and therefore obviate the need for local filings.” Stack further noted that U.S. officials are working to ensure that foreign jurisdictions will accept the “voluntary” submissions.

Taxpayers concerned about gap-year filings should carefully monitor Treasury’s activity in this area. Although voluntary filings may be a welcome solution, many practitioners believe the government needs to ensure that local country law would permit a voluntary filing in lieu of a required local filing during the gap year. If Treasury does not provide a voluntary submission alternative, U.S. companies may consider designating a “surrogate parent” in another country to distribute the reports. However, careful review is needed so that a filing from a surrogate parent is acceptable in the respective foreign jurisdictions where the company has foreign operations and so that the treaty network in the surrogate parent’s country has sufficient confidentiality safeguards.

Tax professional standards statement
This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.