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Frequently Asked Questions (FAQs) - Country-by-Country Reporting

General Questions

A1. What is Country-by-Country (CbC) reporting?
A2. Where can I find additional guidance and resources on Country-by-Country (CbC) reporting?

Data Format and Structure

B1. Does the IRS intend to follow the Organisation for Economic Cooperation and Development (OECD) schema as part of electronically filing Form 8975?
B2. Can I file Form 8975 on paper?
B3. Where can I find Form 8975 XML schema?

Exchange of Information

C1. How will the IRS use Country-by-Country (CbC) data?
C2. Which tax jurisdictions does the IRS have competent authority arrangements (CAAs) with for the automatic exchange of CbC reports?
C3. When will the U.S. exchange Country-by-Country (CbC) reports with other tax jurisdictions with which the U.S. has a double taxation treaty or tax information exchange agreement in force and a competent authority arrangement operative?
C4. How do I report instances (or suspicions) of unauthorized disclosure or misuse of information exchanged with a double taxation treaty/tax information exchange agreement partner?

Reporting Requirements

D1. When can I file Form 8975?
D2. Organization for Economic Cooperation and Development (OECD) guidance provides for transitional filing options for multinational enterprise (MNE) groups having an ultimate parent entity in a tax jurisdiction that requires Country-by-Country (CbC) reports for periods that begin after January 1, 2016, or “parent surrogate filing.” Is the United States allowing for this transitional filing?
D3. If a taxpayer has already filed its income tax return for the 2016 tax year, but wants to file a Form 8975 for that period (an early reporting period), what should the taxpayer do?
D4. How are U.S limited liability companies (LLCs) reported on Form 8975?
D5. How should the information of a U.S. limited partnership (LP) or limited liability company (LLC) that has not elected to be treated as a corporation for federal tax purposes and is the ultimate parent entity of a U.S. MNE group be reported on Form 8975 and Schedule A (Form 8975)?
D6. Under the CbC reporting framework provided by the OECD, under what circumstances would the foreign subsidiaries of a U.S. MNE group be subject to a local filing requirement in a foreign tax jurisdiction?
D7. If there is more than one constituent entity in a jurisdiction, should the financial information in Part 1 of Schedule A (Form 8975) be reported as an aggregate of the constituent entity information or consist of consolidated data that eliminates intra-jurisdiction transactions between constituent entities in that jurisdiction? The OECD Guidance on the Implementation of Country-by-Country Reporting indicates that, in certain circumstances, jurisdictions may allow MNE groups to provide consolidated data in CbC Reports.
D8. Treas. Reg. § 301.7701-3(c) allows a business entity that is an eligible entity to be classified for federal tax purposes other than its default classification (partnership, disregarded entity, or corporation) under Treas. Reg. § 301.7701-3(b) by making an election (“check-the-box election”). Does a check-the-box election have any effect when reporting constituent entities on the CbC Report?

Comment on Country-by-Country Reporting

If you have additional comments about Country-by-Country Reporting compliance, please send your comments to our email address.

NOTE: Do not provide any personal identification information such as your name, taxpayer identification number, address, or telephone number.


General Questions

A1. What is Country-by-Country (CbC) reporting?
CbC reporting is part of Action 13 of the Organisation for Economic Cooperation and Development (OECD) Base Erosion and Profit Shifting Action Plan, which is intended to promote greater transparency for tax administrations by providing them with relevant and reliable information to conduct high-level transfer pricing risk assessments.

To accomplish this, a competent authority will automatically exchange CbC reports prepared by multinational enterprise (MNE) groups with a reporting entity in its jurisdiction with partner jurisdiction competent authorities in all jurisdictions in which the MNE group operates, provided that a legal instrument allowing for the automatic exchange of information (e.g., double taxation convention (DTC) or tax information exchange agreement (TIEA)) is in force and a competent authority arrangement (CAA) for the exchange of CbC reports is operative with such second-mentioned jurisdictions.

Per Treasury Regulations §1.6038-4 (TD 9773), the ultimate parent entity of a U.S. MNE Group with $850 million or more of revenue in the relevant preceding annual reporting period will file Form 8975 and Schedules A (i.e., the "CbC Report") with their annual income tax return.

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A2. Where can I find additional guidance and resources on Country-by-Country (CbC) reporting?
The IRS CbC website includes a CbC Reporting Guidance page that contains links to the final CbC Treasury Regulations, Rev. Proc. 2017-23 on filing for early reporting periods, model competent authority arrangements, CbC Reporting Jurisdiction Status Table, OECD guidance, and forms and instructions.

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Data Format and Structure

B1. Does the IRS intend to follow the Organisation for Economic Cooperation and Development (OECD) schema as part of electronically filing Form 8975?
U.S. taxpayers that file their returns electronically should use an IRS-approved Extensible Markup Language (XML) schema that is compatible with the Modernized e-File (MeF) system to file Form 8975 and Schedules A. The MeF schemas and business rules are now available through the Registered User Portal and your e-Services mailbox. When the IRS conducts international exchanges with partner jurisdictions under a treaty or Tax Information Exchange Agreement and a Competent Authority Arrangement, the IRS will use the approved OECD Country-by-Country (CbC) XML schema.

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B2. Can I file Form 8975 on paper?
Paper returns are accepted; however, in order to ensure the timely automatic exchange of the CbC reports, U.S. ultimate parent entities are encouraged to file their returns electronically. If an income tax return is filed electronically using MeF, then Form 8975 and Schedules A must be attached electronically in the correct XML format. Form 8975 cannot be filed as a standalone tax form. Please note that Portable Document Format (PDF) and binary attachments to electronic filings will not be accepted. If a taxpayer is filing a paper return, the IRS requests that they also mail a copy of page 1 of Form 8975 to Ogden. See the Instructions for Form 8975 and Schedule A (Form 8975) for further information.

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B3. Where can I find Form 8975 XML schema?
Form 8975 Modernized e-File schemas and business rules are available upon request through the Registered User Portal and your e-Services mailbox. This mailbox is part of the Secure Object Repository (SOR). Users will access their mailbox in their existing e-Services account to pick up the schema and business rules packages. Find additional information and instructions for accessing the SOR mailbox.

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Exchange of Information

C1. How will the IRS use Country-by-Country (CbC) data?
The CbC data will be used by the IRS in conjunction with other taxpayer data for high-level assessment of transfer pricing, and other Base Erosion and Profit Shifting (BEPS) tax risks, and for economic and statistical analysis. The assessments and analysies will be done in accordance with the Organisation for Economic Cooperation and Development (OECD) guidance on appropriate use of CbC reporting information (.pdf) and in accordance with our double taxation convention (DTC) and tax information exchange agreement (TIEA) obligations and competent authority arrangement (CAA) commitments.

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C2. Which tax jurisdictions does the IRS have competent authority arrangements (CAAs) with for the automatic exchange of CbC reports?
The U.S. Competent Authority is committed to entering into CAAs for the exchange of CbC reports with those jurisdictions within the Inclusive Framework that have a legal instrument allowing for the automatic exchange of information with the United States and that the United States has determined have both appropriate safeguards to ensure that the information received remains confidential and is used solely for tax purposes and the infrastructure for an effective exchange relationship. The U.S. Competent Authority is negotiating with its DTC and TIEA partners CbC CAAs on a bilateral basis. For a list of the CbC reporting CAAs that have been signed, see the CbC Reporting Jurisdiction Status Table.

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C3. When will the U.S. exchange Country-by-Country (CbC) reports with other tax jurisdictions with which the U.S. has a double taxation treaty or tax information exchange agreement in force and a competent authority arrangement operative?
Consistent with the OECD guidance, the U.S. intends to begin exchanging CbC reports with such tax jurisdictions no later than June 2018.

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C4. How do I report instances (or suspicions) of unauthorized disclosure or misuse of information exchanged with a double taxation treaty/tax information exchange agreement partner?
The IRS CbC website contains guidance for reporting instances (or suspicions) of unauthorized disclosure or misuse of information exchanged under an international agreement. When reporting such instances, you should not include information that could identify a taxpayer, such as a taxpayer identification number, social security number, or individual taxpayer identification number.

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Reporting Requirements

D1. When can I file Form 8975?
Form 8975 and Schedules A can now be filed for a reporting period with the income tax return for the taxable year of the ultimate parent entity of the U.S. multinational enterprise group with or within which the reporting period ends. Form 8975 and Schedule A are now available on IRS.gov.

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D2. Organization for Economic Cooperation and Development (OECD) guidance provides for transitional filing options for multinational enterprise (MNE) groups having an ultimate parent entity in a tax jurisdiction that requires Country-by-Country (CbC) reports for periods that begin after January 1, 2016, or “parent surrogate filing.” Is the United States allowing for this transitional filing?
Yes. Revenue Procedure 2017-23 allows for U.S. ultimate parent entities to file a Form 8975 and Schedules A with the IRS for periods beginning after January 1, 2016, and prior to the required reporting period in Treasury Regulations §1.6038-4 (TD 9773). If the ultimate parent entity of a U.S. MNE group files with the IRS for an early reporting period, and provided that the other conditions of the OECD guidance on parent surrogate filing are met (such as proper notifications by the U.S. MNE group to foreign jurisdictions), then the U.S. MNE group should not be subject to a local filing requirement in a foreign jurisdiction.

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D3. If a taxpayer has already filed its income tax return for the 2016 tax year, but wants to file a Form 8975 for that period (an early reporting period), what should the taxpayer do?
An ultimate parent entity that files (or has filed) an income tax return for a taxable year without a Form 8975 attached and that wishes to file a Form 8975 for an early reporting period must follow the procedures for filing an amended income tax return and attach Form 8975 and Schedules A to the amended return. As described in Revenue Procedure 2017-23, those doing so for an early reporting period must do so within twelve months of the close of the taxable year that includes the early reporting period. For more information review Revenue Procedure 2017-23.

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D4. How are U.S limited liability companies (LLCs) reported on Form 8975?
Generally, U.S. LLCs that do not elect to be treated as corporations for federal income tax purposes are treated as “stateless,” and their financial and employee information should be provided on a Schedule A (Form 8975) for stateless entities.

However, a U.S. LLC that does not elect to be treated as a corporation for federal income tax purposes and is wholly and directly owned by a business entity that is organized and has its tax jurisdiction of residence in the United States will be considered to be a U.S. business entity that has its tax jurisdiction of residence in the United States. If such a U.S. LLC, in turn, wholly and directly owns another U.S. LLC, the other U.S. LLC will also be considered to be a U.S. business entity that has its tax jurisdiction of residence in the United States.

Thus, a U.S. LLC that meets the above criteria to be treated as having its tax jurisdiction of residence in the United States will be listed as a Constituent Entity on the Schedule A (Form 8975) for the United States, and its financial and employee information should be aggregated with other U.S. Constituent Entities of the U.S. MNE group, rather than being reflected on the Schedule A for stateless entities.

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D5. How should the information of a U.S. limited partnership (LP) or limited liability company (LLC) that has not elected to be treated as a corporation for federal tax purposes and is the ultimate parent entity of a U.S. MNE group be reported on Form 8975 and Schedule A (Form 8975)?
A U.S. LP or LLC is a U.S. business entity because it is organized in the United States, and thus may be the ultimate parent entity of a U.S. MNE group. However, a U.S. LP or LLC ultimate parent entity that has not elected to be treated as a corporation for federal tax purposes will be considered a stateless entity for all other purposes of the country-by-country report. Thus, the financial data of the U.S. LP or LLC ultimate parent entity should be aggregated with the information of any other stateless constituent entities of the U.S. MNE group and reported on a Schedule A (Form 8975) for stateless entities. The Additional Information sections on the Form 8975 and/or Schedule A (Form 8975) for stateless entities may be used to provide any additional information regarding the U.S. LP or LLC that the ultimate parent entity considers useful for understanding the information on the report.

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D6. Under the CbC reporting framework provided by the OECD, under what circumstances would the foreign subsidiaries of a U.S. MNE group be subject to a local filing requirement in a foreign tax jurisdiction?
Based on the OECD model legislation for CbC reporting, a U.S. MNE group’s foreign subsidiaries cannot be subject to a local filing requirement in a foreign tax jurisdiction unless the United States has a legal instrument allowing for the automatic exchange of information with the foreign jurisdiction but has not entered into a competent authority arrangement (CAA) to provide for the automatic exchange of CbC reports by the end of 12 months following the end of the fiscal reporting year of the U.S. MNE group or unless there has been a “systemic failure” on the part of the United States. A systemic failure occurs when there is a CAA in place, but a jurisdiction (in this case, the United States) has suspended automatic exchange for reasons other than those that are in accordance with the terms of the CAA or otherwise persistently fails to automatically exchange CbC reports.

Furthermore, the foreign jurisdiction cannot require local filing if it does not meet the standards of confidentiality, consistency, and appropriate use, as described in the OECD guidance. If a U.S. MNE group determines that it is not required to file a Form 8975 because, for instance, it does not meet the reporting threshold under Treasury Regulations §1.6038-4 (TD 9773), a foreign jurisdiction cannot require that a local subsidiary of the U.S. MNE group file a CbC report merely because the U.S. MNE group exceeds the revenue threshold in the foreign jurisdiction.

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D7. If there is more than one constituent entity in a jurisdiction, should the financial information in Part 1 of Schedule A (Form 8975) be reported as an aggregate of the constituent entity information or consist of consolidated data that eliminates intra-jurisdiction transactions between constituent entities in that jurisdiction? The OECD Guidance on the Implementation of Country-by-Country Reporting indicates that, in certain circumstances, jurisdictions may allow MNE groups to provide consolidated data in CbC Reports.
Treas. Reg. § 1.6038-4 requires U.S. MNE groups to provide aggregated data on the CbC Report. Note, however, that revenue does not include payments received from other constituent entities in the MNE group that are treated as dividends in the payor's tax jurisdiction of residence. Additionally, distributions and remittances from constituent entities in the MNE group that are partnerships, other fiscally transparent entities, or permanent establishments are not considered revenue of the recipient-owner.

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D8. Treas. Reg. § 301.7701-3(c) allows a business entity that is an eligible entity to be classified for federal tax purposes other than its default classification (partnership, disregarded entity, or corporation) under Treas. Reg. § 301.7701-3(b) by making an election (“check-the-box election”). Does a check-the-box election have any effect when reporting constituent entities on the CbC Report?

With respect to foreign eligible entities, a check-the-box election does not affect the tax jurisdiction of residence of the foreign entity; thus, the election has no impact on the reporting of foreign entities on the CbC Report.

With respect to domestic eligible entities, a disregarded entity or partnership that, as a result of a check-the-box election, is classified as a corporation for federal tax purposes will have the United States as its tax jurisdiction of residence.

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