On December 23, 2015, the IRS issued a proposal on implementation of country-by-country reporting in the United States.

The proposed regulations (REG-109822-15) describe a new requirement for certain US persons that are the ultimate parent entity of an MNE group to file an annual report if the US MNE group had revenues of at least USD 850 million for the preceding annual accounting period. The report is to include information on a country-by-country basis related to the MNE group’s income and taxes paid, together with certain indicators of the location of economic activity within the MNE group, more specifically:

  • Revenues generated from transactions with other constituent entities of the US based MNE group;
  • Revenues not generated from transactions with other constituent entities of the US based MNE group;
  • Profit (or loss) before income tax;
  • Income tax paid on a cash basis to all tax jurisdictions, including any taxes withheld on payments received;
  • Accrued tax expense recorded on taxable profits (or losses), reflecting only the operations in the relevant annual accounting period and excluding deferred taxes or provisions for uncertain tax positions;
  • Stated capital;
  • Accumulated earnings;
  • Number of employees on a full-time equivalent basis in the relevant tax jurisdiction; and
  • Net book value of tangible assets other than cash or cash equivalents.

The Treasury Department and the IRS invite comments from the public on all aspects of the proposed regulations. The proposed regulations will apply to taxable years of ultimate parent entities of US based MNE groups that begin on or after the date that the proposed regulations are published as final in the Federal Register.