The U.S. Treasury has issued final regulations requiring multinational companies to provide country-by-country reporting that will enable tax authorities around the world to compare notes on corporate taxpayers.
The regulations will not be considered “published” until they appear in the Federal Register, but tax experts say Treasury was looking to get the final regulations out by the end of June to somewhat coordinate filing deadlines with requirements in other countries. The filing requirement will apply to the ultimate parent entity of a multinational enterprise group with revenues of $850 million.
Treasury proposed the regulations in December to conform U.S. tax policy with the Organisation for Economic Co-operation and Development’s Base Erosion and Profit Shifting project. That’s a global effort to coordinate tax authorities from G20 and other nations to collect and share tax information on multinational entities. The idea is get tax authorities working together in a way that makes it more difficult for global companies to avoid tax by shifting profits to low-tax or no-tax jurisdictions.
The final regulations are not dramatically different from what Treasury proposed in December 2015 or signaled through public comments, experts say. To comply with the U.S. filing requirement, companies will need to complete three separate tables of information, says David Slemmer, director of transfer pricing for tax services firm Ryan. The first table provides an overview of a global company’s allocation of income, taxes, and activities, he says.
The second table is a listing of the various entities within the parent company and the jurisdictions where they do business. “It’s a roadmap to an audit, in many ways, or it can be used that way,” says Slemmer. The final table is a “catch all,” he says. “It will be helpful to tax authorities to perform high-level transfer pricing risk assessments.
The new filing requirement takes effect July 1, so it applies to tax years beginning after that date. Some countries following the OECD guidance have already enacted filing requirements that begin with the start of 2016, so Treasury has promised it will accept voluntary filings by U.S. taxpayers that will facilitate compliance with effective dates in other jurisdictions.