How to Complete the Country by Country Reporting Form

Country-by-Country (CbC) reporting is a global transparency measure originating from the Organisation for Economic Co-operation and Development’s (OECD) work on Base Erosion and Profit Shifting (BEPS). This initiative created a standardized reporting framework for large multinational enterprises. The purpose of CbC reporting is to provide tax administrations with a high-level overview of a company’s global operations, giving them visibility into the allocation of income, taxes paid, and economic activity across different tax jurisdictions.

The framework is a risk assessment tool that helps authorities determine if further scrutiny of a company’s transfer pricing policies is warranted; it is not a direct basis for tax assessments. The United States has adopted these rules, requiring certain U.S.-based multinational corporations to provide this detailed information annually to the Internal Revenue Service (IRS).

Determining Filing Requirements

A Multinational Enterprise (MNE) Group is a collection of enterprises bound by ownership or control that must prepare consolidated financial statements. The entity at the top of this structure is the Ultimate Parent Entity (UPE), which owns or controls the MNE Group and is not owned by any other enterprise. The UPE bears the primary responsibility for filing the CbC report.

The obligation to file a CbC report is triggered by a revenue threshold. The global standard applies to MNE groups with annual consolidated revenue of €750 million or more, but for U.S.-based MNEs, the IRS has set the equivalent threshold at $850 million for the preceding fiscal year. If an MNE group’s revenue meets or exceeds this amount, its U.S. parent entity must file the report.

This filing is done in the UPE’s jurisdiction of tax residence. In limited circumstances, the filing responsibility may shift if the UPE is not required to file in its home country. This could require a designated Surrogate Parent Entity or another local entity to file the report directly with its local tax authority.

Information Required for CbC Reporting

The CbC report mandates the aggregation of specific financial and operational data for every tax jurisdiction in which the MNE group has a taxable presence. This information provides a snapshot of the group’s worldwide activities.

Financial data begins with revenues, separated into transactions with related parties and those with unrelated third-party customers. These figures are combined to present total consolidated revenues for each jurisdiction. The report also requires the profit or loss before income tax for all constituent entities resident in a tax jurisdiction.

The report requires disclosure of income tax paid on a cash basis during the fiscal year. This includes payments made by all constituent entities in a jurisdiction, regardless of the year the taxes relate to. Separately, the report requires the amount of income tax accrued for the current year, which reflects the current year’s tax expense.

Data on capital and assets is also required. Stated capital must be reported for each jurisdiction, representing the total stated capital of all constituent entities resident there. Similarly, accumulated earnings must be aggregated for all entities in that jurisdiction. The report also calls for the net book value of tangible assets, which includes property, plant, and equipment but specifically excludes cash, cash equivalents, and intangible assets. Finally, the total number of employees must be reported on a full-time equivalent (FTE) basis for each jurisdiction.

In addition to these aggregated data tables, the MNE must prepare a list of every constituent entity within the group. For each entity, the report must identify its tax jurisdiction of residence and the nature of its main business activities.

Completing the CbC Report Form

For U.S. MNEs, the CbC report is filed using IRS Form 8975, Country-by-Country Report, and its accompanying Schedule A. The form must be submitted in a specific XML schema.

The form is structured into several parts. Part I of Form 8975 is for the identification of the filer, requiring its name, Employer Identification Number (EIN), and the relevant tax year. Part II gathers high-level information about the MNE group, such as the UPE’s name and jurisdiction, and specifies the currency used for all financial data.

The core of the report is Schedule A (Form 8975), titled “Tax Jurisdiction and Constituent Entity Information.” Part I of this schedule is a table where the aggregated data is entered, with each row representing a different tax jurisdiction. The columns correspond to the required data points like revenues, profit, taxes paid, employees, and assets.

Part II of Schedule A provides a detailed list of all constituent entities within the MNE group. For each tax jurisdiction listed in Part I, the filer must identify every entity resident there. This includes providing its legal name, tax identification number, and a code for its main business activities.

The Filing Process

Once Form 8975 and all required Schedule A attachments are fully completed, the next step is the formal submission. The CbC report is not filed as a standalone document. Instead, it must be attached to the annual income tax return of the U.S. business entity that is filing the report. For example, a corporate UPE would attach Form 8975 to its Form 1120, U.S. Corporation Income Tax Return.

The filing deadline for Form 8975 is directly tied to the income tax return it accompanies, including any extensions that have been properly filed. Failing to attach the form to the timely filed return can result in penalties. It is important to coordinate the preparation of the CbC report with the overall tax compliance calendar to ensure a timely submission.

After filing, the IRS uses the submitted data for high-level risk assessment to identify potential areas of concern in a company’s global tax structure. The data helps the agency direct its audit and examination resources more effectively.

A significant post-filing action is the automatic exchange of the CbC report with foreign tax authorities. Under a network of international agreements, the IRS will transmit the report to the tax administrations of other countries where the MNE group operates. This provides those jurisdictions with the same standardized information for their risk assessment activities.