Country-by-country reporting rules are issued in proposed form.

• Author: Schreiber, Sally P.

To conform U.S. procedures with the Organisation for Economic Cooperation and Development's base erosion and profit shifting (BEPS) project to prevent multinational companies from shifting profits to low- or no-tax jurisdictions, the IRS issued proposed rules governing country-by-country reporting by any U.S. person that is the "ultimate parent entity" of a multinational enterprise (MNE) group (REG-109822-15). The rules would require the ultimate parent entity of an MNE group with revenue of $850 million or more in the preceding accounting period to file an as-yet-unreleased form, to be called "Country-by-Country Report," starting with tax years beginning after the regulations are published as final.

An ultimate parent entity of a U.S. MNE group is defined as a U.S. business entity that controls a group of business entities, at least one of which is organized or tax resident outside of the United States, that are required to consolidate their accounts for financial reporting purposes under U.S. GAAP, or that would be required to consolidate their accounts if equity interests in the U.S. business entity were publicly traded on a U.S. securities exchange.

A business entity would be considered resident in a tax jurisdiction if, under the jurisdiction's laws, the business entity is liable to tax based on place of management, place of organization, or other similar rules, but not just because it is liable for tax on income or capital located there. The proposed regulations also prescribe how to determine the tax jurisdiction of residence of a business entity that is resident in more than one tax jurisdiction or that is a permanent establishment.

The rules require reporting the MNE group's income and taxes paid, together with certain indicators of the location of economic activity within the MNE group, for each constituent entity. A constituent entity is defined as any...