US signs first agreement to exchange tax information


By Alistair M. Nevius

The US government has signed its first agreement with a foreign country to automatically exchange information on multinational companies’ income and taxes paid. The agreement with the Netherlands was signed in April, and its text was released this week.

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).

These rules conform US reporting requirements with the rules of the Organisation for Economic Co-operation and Development’s (OECD’s) Action Plan on Base Erosion and Profit Shifting (BEPS), which aims to stop multinational companies from shifting profits to low- or no-tax jurisdictions. All OECD and G20 countries have committed to the adoption of country-by-country reporting requirements for multinational companies. However, the US has not signed the OECD’s Multilateral Competent Authority Agreement on the Exchange of Country-by-Country Reports and so must individually negotiate agreements with foreign countries.

The agreement with the Netherlands will allow US multinational companies to file Form 8975 with the IRS when they file their income tax returns, and the IRS will then exchange that information with the Dutch Tax and Customs Administration, if the multinational is resident for tax purposes in the Netherlands or has a permanent establishment situated in the Netherlands.

Alistair Nevius (Alistair.Nevius@aicpa-cima.com) is CGMA Magazine’s editor-in-chief, tax.