The UK and the US reached an agreement to exchange the country-by-country tax reports they receive from multinational enterprise groups. This is the 20th agreement signed by the US, which must negotiate such agreements with individual countries since it has not signed on to the Organisation for Economic Co-operation and Development’s Multilateral Competent Authority Agreement on the Exchange of Country-by-Country Reports.
Under rules issued in 2016, the US requires the ultimate parent entity of US multinational enterprise groups with revenue of $850 million or more in the preceding accounting period to file Form 8975, Country-by-Country Report, with the US tax agency, the Internal Revenue Service (IRS). Multinationals must file Schedule A of Form 8975 for each tax jurisdiction in which its group had one or more constituent entities resident. Schedule A requires the multinational to report aggregate profit or loss before income tax, aggregate income tax paid, stated capital for each constituent entity, aggregate accumulated earnings, number of full-time-equivalent employees, and aggregate net book value of tangible assets, and to identify constituent members of the group.
Under the agreement with the UK, US multinational companies will file Form 8975 with the IRS when they file their income tax returns, and the IRS will then exchange that information with Her Majesty’s Revenue and Customs (HMRC), if the multinational is resident for tax purposes in the UK or has a permanent establishment situated in the UK.
UK multinational groups with €750 million or more of revenue in the preceding accounting period have a similar obligation to file a country-by-country report with HMRC, which will forward that information to the IRS for multinationals that are resident for tax purposes in the US or have a permanent establishment situated in the US.
The other countries the US has country-by-country information exchange agreements with are Australia, Belgium, Brazil, Canada, Denmark, Estonia, Guernsey, Iceland, Ireland, the Isle of Man, Jamaica, Latvia, Malta, the Netherlands, New Zealand, Norway, Slovakia, South Africa, and South Korea.
—Alistair Nevius (Alistair.Nevius@aicpa-cima.com) is CGMA Magazine’s editor-in-chief, tax.