IRS Publishes Joint Statement With France On The Spontaneous Exchange Of CbC Reports For 2017

; posted on
December 13th, 2018

On 11 December 2018, the U.S. IRS published a joint statement with the competent authority of France on the spontaneous exchange of Country-by-Country (CbC) reports for reporting fiscal years beginning in 2017. This statement is one of the practical effects of the OECD and G20 initiatives to tackle base erosion and profit shifting (the BEPS action plan) that both countries publicly announced to adhere to.

The joint statement is essentially the same as the statement published for the 2016 reporting fiscal year and provides that CbC reports will be exchanged pursuant to Article 27 (Exchange of Information) of the 1994 France-U.S. tax treaty, as amended, for fiscal years of MNE Groups commencing on or after 1 January 2017 and before 1 January 2018.

Increase International Tax Transparency

Both France and the US agree to increase international tax transparency by enhancing access of the respective tax authorities to information regarding the global allocation of the income, the taxes paid, and certain indicators of the location of economic activity among tax jurisdictions in which multinational enterprise groups (“MNE Groups”) operate through the exchange of annual country-by-country reports (“CbC Reports”). The CbC Reports will be used to assessing high-level transfer pricing risks and other base erosion and profit shifting related risks, as well as for economic and statistical analysis, where appropriate.

The Competent Authorities will exchange the CbC Reports with respect to fiscal years of for fiscal years of MNE Groups commencing on or after 1 January 2017 and before 1 January 2018. The joint statement also notes that the U.S. and France are still negotiating a competent authority arrangement to allow for the automatic exchange of CbC Reports.

Implications for U.S. Companies

To the extent the following conditions take place, no constituent entities of that group will be subject to a local filing obligation in France:

  • a U.S. MNE Group files a Spontaneously Exchanged CbC Report with the U.S. Internal Revenue Service conforming to the requirements of the 2015 Report;
  • the U.S. MNE Group has one or more constituent entities that are resident for tax purposes in the French Republic or subject to tax with respect to the business carried out through a permanent establishment situated in the French Republic; and
  • the CbC Report is spontaneously exchanged with the Competent Authority of the French Republic pursuant to Article 27 of the Convention,

Source: IRS, OrbiTax, French Tax Administration

 

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