On August 11, 2017, the U.S. Internal Revenue Service (IRS) issued Bulletin 2017-2 on its acceptance of Form 8975, Country-by-Country Report.
Ultimate parent entities (UPEs) of U.S. multinational enterprise (MNE) groups with $850 million or more of revenues in a previous annual reporting period can now file Form 8975 with their annual income tax return. See Treas. Reg. §1.6038-4(a). Form 8975, and attached Schedule A will report a U.S. MNE group’s income, taxes paid, and other indicators of economic activity on a country-by-country (CbC) basis. See BEPS Action 13. Rev. Proc. 2017-23 allows for U.S. UPEs to file Form 8975 and Schedule A with the IRS for reporting periods beginning on or after January 1, 2016 and prior to the required reporting period in Treas. Reg. §1.6038-4 (June 30, 2016).
The reporting period covered by Form 8975 is the period of the UPE’s applicable financial statement prepared for the 12-month period that ends with/within its taxable year. If no annual applicable financial statement exists, then the reporting period covered by Form 8975 is the 12-month period that ends on the last day of the UPE’s taxable year. See Treas. Reg. §1.6038-4(c).
The return on Form 8975 must include the following information with respect to each constituent entity of the U.S. MNE group:
- Complete legal name.
- Jurisdiction, if any, in which the constituent entity is resident for tax purposes.
- Jurisdiction in which the constituent entity is organized or incorporated (if different from the jurisdiction of tax residence).
- Tax identification number, if any, used for the constituent entity by the tax administration of the constituent entity’s jurisdiction of tax residence.
- Main business activities.
Jurisdiction of tax residence
The return on Form 8975 must include the following information with respect to each tax jurisdiction in which one or more constituent entities of a U.S. MNE group is resident, presented in the aggregate:
- Revenues generated from transactions with other constituent entities.
- Revenues not generated from transactions with other constituent entities.
- Profit or loss before income tax.
- Total income tax paid on a cash basis to all tax jurisdictions, and any taxes withheld on payments received by the constituent entities.
- Total accrued tax expense recorded on taxable profits or losses, reflecting only operations in the relevant annual period and excluding deferred taxes or provisions for uncertain tax liabilities.
- Stated capital, except that the stated capital of a permanent establishment (PE) must be reported in the legal entity’s jurisdiction of tax residence, unless there is a defined capital requirement in the PE’s tax jurisdiction for regulatory purposes.
- Total accumulated earnings, except that accumulated earnings of a PE must be reported by the legal entity.
- Total number of employees on a full-time equivalent basis.
- Net book value of tangible assets, not including cash or cash equivalents, intangibles, or financial assets.