by Julie Martin
The US IRS today announced that it will amend its guidance for large multinationals on country-by-country reporting obligations to prevent reporting that jeopardizes national security.
IRS tax regulations on country-by-country reporting, issued in June 2016 (TD 9773), are applicable to US-headquartered MNE groups with annual revenue of USD 850 million or more.
The regulations implement the OECD/G20 base erosion profit shifting (BEPS) scheme, agreed to by nations in 2015 to prevent multinational tax avoidance through transfer pricing or other means. The country-by-country tax reports, gathered by an MNE’s parent company’s country, are exchanged with all countries where the MNE’s subsidiaries are located.
Notice 2018-31 states that the Treasury Department and the IRS have determined that national security interests require modifications to the reporting requirements for US MNE groups considered “specified national security contractors.”
Such contractors are those where more than 50 percent of the US MNE group’s annual revenue in the preceding reporting period is attributable to contracts with the Department of Defense or other US government intelligence or security agencies, the IRS said.
In such cases, the IRS said, revised regulations will provide that the Form 8975 may be completed in the following manner:
- Complete Form 8975 with a statement at the beginning of Part II, Additional Information, that the US MNE group is a specified national security contractor as defined in this notice;
- Complete one Schedule A (Form 8975) for the Tax Jurisdiction of the United States with aggregated financial and employee information for the entire US MNE group in Part I, Tax Jurisdiction Information, and only the ultimate parent entity’s information in Part II, Constituent Entity Information; and
- Complete one Schedule A (Form 8975) for the Tax Jurisdiction “Stateless” with zeroes in Part I, Tax Jurisdiction Information, and only the ultimate parent entity’s information in Part II, Constituent Entity Information.
No other Schedule A (Form 8975) or additional information is required, the Service said.
The guidance provides procedures to amend filings for MNE groups that have already filed.
The Service said that companies may rely on the notice immediately.
Julie Martin
Julie Martin is the founder of MNE Tax. She edits the publication and regularly contributes articles on new developments in cross-border business taxation.
Julie has worked as a tax journalist and editor for more than 13 years. Prior to that, she worked as an in-house tax attorney in New York. She also holds an LLM in taxation from New York University School of Law.
Julie can be reached at [email protected].
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