Tax & Accounting Blog

U.S. IRS Signs More Competent Authority Agreements on Exchange of CbC Reports

BEPS, Blog, Checkpoint, ONESOURCE, Transfer Pricing June 28, 2017

As of June 26, 2017, the IRS has signed bilateral competent authority agreements (CAAs) on the exchange of country-by-country (CbC) reports with the following jurisdictions:

  • Canada – signed on June 7, 2017; CAA not yet available.
  • Denmark – signed on June 21, 2017; CAA not yet available.
  • Guernsey – signed on June 22, 2017; CAA not yet available.
  • Icelandsigned on May 5, 2017.
  • Ireland – signed on June 15, 2017; CAA not yet available.
  • Latvia – signed on June 21, 2017; CAA not yet available.
  • Netherlandssigned on April 11, 2017; applies from April 11, 2017.
  • New Zealandsigned on May 11, 2017.
  • Norwaysigned on April 26, 2017; applies from May 11, 2017.
  • Slovakia – signed on June 21, 2017; CAA not yet available.
  • South Africasigned on May 26, 2017; applies from May 26, 2017.
  • South Korea – signed on June 22, 2017; CAA not yet available.

Background

On April 6, 2017, the U.S. Internal Revenue Service (IRS) published two model CAAs for the exchange of CbC reports. One CAA is based on a double tax convention (DTC) and the other  on a tax information exchange agreement (TIEA).

Under Article [26] of the DTC and Article [1] of the TIEA, each Competent Authority intends to exchange annually on an automatic basis with the other Competent Authority the CbC report received from each reporting entity that is tax resident in its jurisdiction if one or more constituent entities of the MNE group of the reporting entity are tax resident in the other Competent Authority’s jurisdiction, or are subject to tax with respect to a business carried out through a permanent establishment (PE) in the other Competent Authority’s jurisdiction. All information exchanged is subject to the confidentiality and other protections provided for in the DTC and TIEA, including the provisions limiting the use of the information exchanged.

According to the CAAs, a CbC report should be exchanged first for fiscal years of MNE groups beginning on or after January 1, 2016. The CbC report should be exchanged as soon as possible and no later than 18 months after the last day of the group’s fiscal year to which the report relates. CbC reports for fiscal years of MNE groups beginning on or after January 1, 2017, should be exchanged as soon as possible and no later than 15 months after the last day of the group’s fiscal year to which the report relates.

On June 29, 2016, the IRS and U.S. Treasury released the final Regulations on CbC reporting (TD 9773), which  apply to tax years of ultimate parent entities of U.S. MNE groups that begin on or after June 30, 2016, when the MNEs have revenue for the preceding annual accounting period of $850 million or more.

The IRS intends to allow ultimate parent entities of U.S. MNE groups to file CbC reports for reporting periods that begin on or after January 1, 2016, but before the applicability date of the final Regulations (June 30, 2016).

 

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