Close
Close

IRS provides guidance on early adoption of CbC reporting

RFP
Tax Hot Topics: IRS provides guidance on early adoption of CbC reportingThe IRS issued final regulations (TD 9773) on June 29, 2016, that will require U.S. multinationals with more than $850 million in revenue to report specific information on a country-by-country (CbC) basis. The final regulations generally apply beginning with a U.S. multinationals’ tax year that begins on or after June 30, 2016.

This raised concerns for many taxpayers because the Organisation for Economic Co-operation and Development set standards recommending that jurisdictions implement requirements starting in 2016, and for most taxpayers, the final regulations would not be effective until 2017. Because legislation in many jurisdictions includes secondary mechanisms that require local reporting if the parent entity’s jurisdiction doesn’t require CbC reporting, this created the so-called gap year. Without a voluntary submission alternative, many U.S. multinationals would be forced to comply with CbC requirements at various local levels (or by selecting a “surrogate parent”) during this gap year.

To address this concern, the IRS released Rev. Proc. 2017-23, which describes the process for voluntarily filing Form 8975, Country-by-Country Report, and accompanying Schedules A, Tax Jurisdiction and Constituent Entity Information, by ultimate parent entities of U.S. multinationals for reporting periods beginning on or after Jan. 1, 2016, but before the applicability date of Treas. Reg. Sec. 1.6038-4 (i.e., the gap year).

Beginning on Sept. 1, 2017, Form 8975 may be voluntarily filed for a period occurring before the applicability date of Treas. Reg. Sec. 1.6038-4. Form 8975 should be attached to the income tax return or other return as provided in the instructions to Form 8975 for the taxable year of the ultimate parent entity of the U.S. multinational with or within which the gap year ends. If a return has already been filed for such a period, the taxpayer may file an amended income tax return and attach Form 8975 within 12 months of the close of the taxable year that includes the gap year. Filing an amended income tax return solely to attach Form 8975 in accordance with Rev. Proc. 2017-23 will have no effect on the statute of limitations for the income tax return.

An ultimate parent entity that files its return electronically must file Form 8975 through the IRS Modernized e-File system in XML format, not as a binary attachment (e.g., PDF file). In the Rev. Proc., the IRS also encouraged all other taxpayers to file their returns and the Forms 8975 electronically to ensure timely automatic exchange of the country-by country reporting information.

Contact
David Sites
Partner, Washington National Tax Office
+1 202 861 4104

Cory Perry
Experienced Manager, Washington National Tax Office
+1 202 521 1509

 
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.