New Reporting Requirements for Multinational Corporations

• Date: 01 January 2017
• Author: Caroline D. Strobel
• Published date: 01 January 2017
• DOI: http://doi.org/10.1002/jcaf.22251

105

© 2017 Wiley Periodicals, Inc.

Published online in Wiley Online Library (wileyonlinelibrary.com).

DOI 10.1002/jcaf.22251

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IRS

New Reporting Requirements

for Multinational Corporations

Caroline D. Strobel

U.S. COUNTRY-BY-

COUNTRY REPORTING

(FORM 8975; T.D.

9772)

The IRS issued

final regulations

implementing new

country-by-country

reporting require-

ments for multina-

tional enterprise

(MNE) groups with

revenue of $850

million or more

in the preceding

annual accounting

period. These busi-

nesses must file a new Form

8975. Thenew regulations are

designed to prevent multina-

tional companies from shifting

profits to low- or no-tax juris-

dictions. All OECD and G-20

countries have committed to

the adoption of country-by-

country reporting.

In the regulations, 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 (constituent entities),

at least one of which is orga-

nized or a tax resident outside

of the United States, that are

required to consolidate their

accounts for financial report-

ing purposes under U.S. gen-

erally accepted accounting

principles (GAAP), or that

would be required to consoli-

date their accounts if equity

interests in the U.S. business

entity were publicly traded on

a U.S. securities exchange. The

regulations require an MNE

group to report on a country-

by-country basis income and

taxes paid, together with cer-

tain indicators of the location

of economic activity within the

MNE group, for each

constituent entity.

Under the final rules,

grantor trusts, dece-

dents’ estates, and

bankruptcy estates

are not subject to the

reporting rules.

Foreign insur-

ance companies

that elect under Sec.

953(d) to be treated

as domestic corpora-

tions will be treated

as U.S. business

entities that have

their tax jurisdiction

of residence in the

United States. The new regula-

tions also state how partner-

ships and “stateless entities” are

to be treated. Employees of a

constituent entity are included

in the tax jurisdiction of resi-

dence of that entity because

determining where employees’

work is burdensome for U.S.

MNE groups and would be

especially difficult for traveling

employees.

The filing rules for Form

8975 apply for tax years begin-

ning after June 30, 2016, even

through the OECD rules apply

beginning January 1, 2016.

This column has covered the study commissioned

by the Organization for Economic Cooperation

and Development (OECD) to look at changes that

needed to be made in transfer pricing to better

determine the taxable income that multinational

businesses should be required to report in each

country in which they do business. This column

reported the recommendations (base erosion and

profit shifting [BEPS]) that were made after the

study was completed. The OECD adopted the

recommendations that were made and the United

States is now working to bring U.S. reporting

requirements into alignment with new OECD rec-

ommendations. © 2017 Wiley Periodicals, Inc.