X
X

Find Your Specialist

X

Contact Us

    Go Back

    IRS Launches Country-by-Country Reporting Tool

    Countries across the globe banded together a few years ago to put in place a mechanism for tracking the income of multinational companies in each country in which they operate. The effort came under the umbrella of the very bureaucratic sounding initiative, the Organisation of Economic Cooperation and Development’s (OECD) Base Erosion and Profit Shifting (BEPS) Action 13. Under the plan, large multinational enterprises must file a report with information about their all of their worldwide business activities, deemed “Country-by-Country (CbC) Reporting.” The tax authorities in OECD member countries will share this information with other members under Competent Authority Arrangements. This global information exchange is intended to provide tax administrators with companies’ financial data for assessment of transfer pricing and other profit-shifting and for economic and statistical analysis, according to the IRS.

    IRS Tools for U.S. CbC Reporting

    As part of the United States’ CbC Reporting, U.S. parent entities of multinational enterprise groups with $850 million or more of revenue must file Form 8975 and Schedule A (Form 8975) with their annual income tax return. Reporting begins in 2017 for most taxpayers. To facilitate this reporting, the IRS has launched a new CbC Reporting website with important information for affected entities. The website provides an up-to-date Country-by-Country Reporting Jurisdiction Status Table that lists the countries with which the U.S. has signed information exchange agreements. In addition, the CbC Reporting pages also provide:

    Exchanged Information Confidential

    The OECD Action 13 plan requires that exchanged information be kept confidential and that each country have safeguards in place to prevent unauthorized disclosure. The IRS has included in its CbC Reporting website instructions for taxpayers to Report Unauthorized Use for suspected unauthorized disclosure or misuse of information exchanged under an international agreement. The IRS also has promised to suspend information exchanges with any tax jurisdiction that is not in compliance with the confidentiality requirements and use restrictions required under the information exchange agreements.

    Impact, Timing

    Country-by-country reporting affects not only multinational corporations but also other multinational entities, such as LLCs and large partnerships. It also is important to realize that not only the IRS, but other tax authorities around the world will be reviewing your CbC information returns, so careful preparation is a must.

    Failure to file the required forms carries stiff penalties, starting at $10,000, and the timing of the new reports are subject to complex transition rules over the next two years. Thus, it is important to clarify when your company must begin filing. While the IRS webpages give good basic information on the new filing requirements, it is important to consult your Frazier & Deeter tax advisor to do a careful analysis of your filing mandate.

    The OECD, in its own words

    The OECD’s origins date back to 1960, when 18 European countries plus the United States and Canada joined forces to create an organisation dedicated to economic development.

    Today, our 35 Member countries span the globe, from North and South America to Europe and Asia-Pacific. They include many of the world’s most advanced countries but also emerging countries like Mexico, Chile and Turkey.

    We also work closely with emerging economies like the People’s Republic of China, India and Brazil and developing economies in Africa, Asia, Latin America and the Caribbean. Together, our goal continues to be to build a stronger, cleaner and fairer world.

    http://www.oecd.org/

     

    Related Articles

    • 01.25.2023

      A New Year Means New Privacy Laws

      Ever since the General Data Protection Regulation (GDPR) came into effect in May 2018, US state privacy laws have been passed in Virginia, Colorado, Connecticut, Utah and, most pressing of them all, California. The California Privacy Rights Act (CPRA) went…

      Continue Reading
    • 01.19.2023

      The New Rules Under Section 174

      Internal Revenue Code Section 174 has long been used by taxpayers to deduct certain expenses related to research and experimentation (R&E) in the current year.  The code section was originally enacted in 1954 to eliminate uncertainty in the tax accounting…

      Continue Reading
    • 12.20.2022

      IRS Customer Service May Improve in 2023

      With 4,000 new customer service representatives and plans to hire 700 new Taxpayer Assistance Center (TAC) employees, taxpayers soon may get relief from endless hold times, no in-person help and unresolved problems.

      Continue Reading
    • 12.12.2022

      Reduce Taxable Income with IRA Distributions Transfers

      IRA owners who are age 70½ or over can transfer up to $100,000 per year to charity to reduce their taxable income. These transfers, known as qualified charitable distributions or QCDs, offer end-of-the year tax savings and can count toward required minimum distributions (RMDs) that taxpayers who are age 72 must make each year. Think of it as a tax-free charitable rollover of IRA funds.

      Continue Reading
    • 12.02.2022

      UK R&D Tax Reliefs – Where Are We Now?

      In the November 2022 Autumn Statement, the Chancellor announced significant changes to the current Research and Development (R&D) tax reliefs. The key announcements were a change to the applicable rate of the Research and Development Expenditure Credit (RDEC) and a…

      Continue Reading
    • 12.01.2022

      1099s Required for 2022 Tax Year

      Taxpayers earning income from selling goods or providing services may receive a Form 1099-K, Payment Card and Third-Party Network Transactions, for the first time in early 2023, when the 2022 forms are due. The requirement to file Forms 1099 have…

      Continue Reading
    • 11.28.2022

      IRS Uncovers $3.1 Billion in COVID Fraud

      The IRS Criminal Investigation department (IRS-CI) has partnered with the Justice Department to uncover and prosecute fraudulent activities related to the federal government’s COVID relief programs. To date, the IRS has conducted 840 investigations involving fraud amounts totaling more than…

      Continue Reading
    • 10.25.2022

      IRS Inflation Reduction Act Increases Funds

      The Inflation Reduction Act of 2022, enacted in August, increased funding for the IRS by $80 billion through 2031 for enforcement activities, operations support, systems modernization and taxpayer services. The legislative language, Treasury Secretary Janet Yellen and IRS Commissioner Charles…

      Continue Reading

    Privacy Overview

    When you use or access the Site, we use cookies, device identifiers, and similar technologies such as pixels, web beacons, and local storage to collect information about how you use the Site. We process the information collected through such technologies, which may include Personal Information, to help operate certain features of the Site (e.g., to prevent online poll participants from voting more than once), to enhance your experience through personalization, and to help us better understand the features of the Site that you and other users are most interested in.

    You can enable or disable our use of cookies per category.
    Always Enabled