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US Accountants Make Recommendations On CbC Reporting

by Mike Godfrey, Tax-News.com, Washington

24 March 2016


In a March 21 letter to the Internal Revenue Service (IRS), the American Institute of Certified Public Accountants (AICPA) made recommendations on the proposed regulations relating to annual country-by-country (CbC) reporting by US multinational enterprise (MNE) groups.

The proposed regulations would require CbC reporting by US MNE groups from the first taxable year beginning after the rules are made final. It has been pointed out that the earliest possible implementation of the CbC reporting requirement for US MNE groups would therefore be during 2018 (with the filing of the group's 2017 US tax return).

On the other hand, the OECD's base erosion and profit shifting (BEPS) project had recommended (and a number of countries have implemented) CbC reporting for taxable years beginning on or after January 1, 2016. Under the BEPS project, if a particular country does not require MNEs headquartered in its jurisdiction to submit CbC reports, then local reporting by a foreign subsidiary is also potentially required. US taxpayers could therefore find themselves subject to multiple CbC report filing obligations.

AICPA therefore requested in its letter that US MNE groups should also be allowed to elect on a voluntary basis to apply the proposed regulations for tax years beginning on or after January 1, 2016, and before the effective date of the final regulations; and that the IRS should establish procedures to exchange the resultant reports with foreign tax authorities.

In addition, AICPA recommended that the IRS's regulations should clarify that a US MNE group's reporting is based solely upon its own annual accounting period and is not contingent on the timing of the annual accounting periods of its foreign constituent entities; and that it should confirm the correct treatment of US possessions and territories as foreign jurisdictions having "fiscal autonomy."

AICPA also urged that the regulations should allow a robust National Security Exception for the information contained in the required CbC reports.

TAGS: compliance | tax | business | tax compliance | law | Internal Revenue Service (IRS) | tax authority | multinationals | transfer pricing | United States | regulation | BEPS

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