Instructions for Form 8975, Country-by-Country Report

Form 8975, the Country-by-Country (CbC) Report, is a document filed with the Internal Revenue Service (IRS) by certain U.S. business entities that are part of a large multinational enterprise (MNE) group. The purpose of the form is to provide tax authorities with a clear picture of the MNE group’s global operations. The report details the MNE group’s allocation of income, taxes paid, and other indicators of economic activity across the various countries in which it operates. This information helps the IRS and foreign tax administrations assess transfer pricing risks and other tax compliance issues related to base erosion and profit shifting.

Determining Filing Requirements

A U.S. business entity must file Form 8975 if it is the ultimate parent entity of a U.S. MNE group. An ultimate parent entity is the controlling entity of a group of companies that are required to consolidate their financial statements for reporting purposes, meaning it is the top-level entity in the organizational structure and is not controlled by any other entity.

The filing obligation is triggered when the U.S. MNE group has annual revenue of $850 million or more in the preceding annual accounting period. The reporting period for Form 8975 is generally the 12-month period covered by the ultimate parent entity’s applicable financial statements. If such statements are not prepared, the reporting period aligns with the ultimate parent entity’s taxable year.

In some situations, a U.S. entity that is not the ultimate parent may need to file. This can occur if the entity is designated as a surrogate parent entity. A surrogate parent files on behalf of a foreign-parented MNE group under specific circumstances, often to satisfy local filing requirements in other countries where the MNE group operates.

Information and Documentation Needed to Complete Form 8975

Before filling out Form 8975, a filer must gather specific information and documentation. For the main form, general information about the filer is necessary, including the legal name, Employer Identification Number (EIN), and address of the ultimate parent entity. The filer must also clearly identify the accounting period the report covers.

A substantial data collection effort is required for Schedule A, as a separate schedule must be filed for each tax jurisdiction where the MNE group operates. For each jurisdiction, the filer must compile aggregated financial and employee information. This includes:

• Total revenues, broken down into related-party and unrelated-party transactions
• Profit or loss before income tax
• Income tax paid and accrued
• Stated capital
• Accumulated earnings
• Net book value of tangible assets
• The total number of full-time equivalent employees for that jurisdiction

In addition to the aggregated data, the filer must list the details for each constituent entity within that jurisdiction. For every entity, the filer needs its legal name, tax identification number (TIN), its tax jurisdiction of residence, and its jurisdiction of legal organization. The main business activities of each constituent entity must be categorized using specific codes provided in the form’s instructions.

Step-by-Step Guide to Completing the Form

Completing Form 8975 and its schedules requires careful attention to detail to ensure the pre-gathered information is entered accurately. The process begins with the main form and progresses through its various parts and the attached schedules.

Part I – Filer Identification

The first section of Form 8975, Part I, is for identifying the filer. Here, you will enter the complete legal name of the ultimate parent entity of the U.S. MNE group. You must also provide the entity’s Employer Identification Number (EIN) and the reporting role code, which for most filers will be “ULT” to signify they are the ultimate parent entity.

Part II – Additional Information

Part II of the form provides space for additional information. This section is optional but can be used to provide context or explanations for the data reported in the schedules. For example, a filer might use this space to describe the sources of data used or to explain any unusual figures that could be misinterpreted by tax authorities.

Schedule A – Tax Jurisdiction and Constituent Entity Information

A separate Schedule A must be completed for each tax jurisdiction in which the MNE group has one or more constituent entities. Part I of Schedule A is where you report the aggregated financial and employee data for that specific jurisdiction, which was gathered beforehand. Part II of Schedule A requires a detailed listing of each constituent entity resident in that tax jurisdiction. For each entity, you must enter its legal name, Taxpayer Identification Number (TIN), and the jurisdiction where it was organized or incorporated if different from its tax residence. A step is assigning the correct business activity code for each entity from the list provided in the IRS instructions. If an entity has no tax jurisdiction, it is considered “stateless” and must be reported on a separate Schedule A using the country code “X5”.

Filing Procedures for Form 8975

Once Form 8975 and all accompanying schedules are accurately completed, the package must be submitted correctly and on time to be considered filed.

Filing Deadline

The deadline for filing Form 8975 is tied directly to the ultimate parent entity’s annual income tax return. The form and its attachments must be filed with the income tax return by its due date, including any extensions. For a calendar-year taxpayer, the extended due date is typically October 15. Failing to file by this deadline can result in penalties.

Mailing Instructions

Most large multinational enterprises file their tax returns, including Form 8975, electronically through the IRS Modernized e-File (MeF) system. For those who file a paper return, Form 8975 and its attachments must be included with that paper tax return. Filers who submit a paper return must also mail a separate copy of page 1 of Form 8975 to a specific IRS address in Ogden, Utah.

Post-Filing Expectations

After filing, the information on Form 8975 is used by the IRS for high-level risk assessment of transfer pricing and other international tax issues. The data is also automatically exchanged with tax authorities in other countries that have entered into information exchange agreements with the United States. Filers are required to maintain records that support the information provided on the form, though they are not required to create records that reconcile the CbC report amounts to specific tax returns or financial statements.