Which entities are required to file CbCR in the US?

A U.S. CbC Report is generally required from a U.S. business entity that is the ultimate parent entity of an MNE group with annual consolidated group revenue of $850 million or more in the immediately preceding fiscal year. This threshold is specified in Treasury Regulations Section 1.6038B-2(b)(1). The MNE group must also have operations in at least two countries.

What is the revenue threshold for CbCR in the US?

The revenue threshold for CbCR in the U.S. is $850 million or more in consolidated group revenue in the immediately preceding fiscal year. This threshold is fixed and not subject to annual inflation adjustments. MNE groups falling below this threshold are generally exempt from the U.S. CbCR filing requirement.

What IRS form is used for CbCR?

The IRS form used for Country-by-Country Reporting is Form 8975, Country-by-Country Report. This form is accompanied by Schedule A (Form 8975), Tax Jurisdiction Information, which provides the detailed financial and tax data for each jurisdiction. These forms are filed electronically with the ultimate parent entity's income tax return.

When is Form 8975 due?

Form 8975 is due with the ultimate parent entity's income tax return for the tax year to which the CbC Report relates. This means it follows the same filing deadlines, including extensions, as the parent's Form 1120 or other applicable income tax return. For example, a calendar-year corporation would typically file by April 15th, or October 15th with an extension.

What information is reported on Form 8975?

Form 8975 requires reporting of aggregate information for each tax jurisdiction where the MNE group operates. This includes revenues (related and unrelated parties), profit (loss) before income tax, income tax paid, income tax accrued, stated capital, accumulated earnings, number of employees, and tangible assets other than cash or cash equivalents. This data is crucial for tax authorities to assess transfer pricing risks.

Are there penalties for non-compliance with CbCR?

Yes, significant penalties can apply for non-compliance with CbCR. These can include penalties for failure to file, incomplete information, or inaccurate information, under IRC Section 6038B. Penalties can be substantial, potentially reaching $25,000 for initial failures and increasing with continued non-compliance, as outlined in Treasury Regulations Section 1.6038B-2(h).

What are common mistakes MNEs make with CbCR?

Common mistakes include misinterpreting the revenue threshold, incorrect aggregation of financial data across jurisdictions, inconsistent application of accounting principles, and failing to timely file Form 8975. MNEs also often struggle with accurately mapping legal entities to their respective tax jurisdictions and ensuring data consistency with other tax filings. These errors can lead to increased scrutiny from tax authorities.

What are audit red flags for CbCR?

Audit red flags include significant disparities between reported income and taxes paid in certain jurisdictions, large profits with minimal employees or tangible assets, or substantial related-party revenues in low-tax jurisdictions. Inconsistencies between CbCR data and other filings, such as Form 5471 or Form 5472, will also draw IRS attention. The IRS uses this data to identify potential base erosion and profit shifting.

How does CbCR interact with transfer pricing documentation?

CbCR provides a high-level overview of an MNE's global activities, serving as a risk assessment tool for tax authorities. It complements, but does not replace, detailed transfer pricing documentation (e.g., master file and local file documentation under Treasury Regulations Section 1.482-7). If CbCR highlights potential risks, tax authorities will likely request more detailed transfer pricing documentation to investigate further.

Can a US subsidiary be required to file CbCR?

Generally, a U.S. subsidiary is not required to file a U.S. CbC Report if its ultimate parent entity is a foreign entity that files a CbC Report in its jurisdiction. However, a U.S. subsidiary may be designated as a 'surrogate parent entity' if the foreign ultimate parent is not required to file or if there's no exchange agreement, as per Treasury Regulations Section 1.6038B-2(c). This ensures the IRS receives the necessary information.

What is the impact of CbCR on tax planning?

CbCR significantly impacts tax planning by increasing transparency and forcing MNEs to consider how their global profit allocation will appear to tax authorities. It discourages aggressive tax planning strategies that result in significant profits in low-tax jurisdictions with little economic substance. MNEs must now ensure their tax structures are defensible and align with their economic activities.

How does CbCR relate to BEPS Action 13?

CbCR is a direct outcome of the OECD's Base Erosion and Profit Shifting (BEPS) Action 13 report. Action 13 recommended a three-tiered approach to transfer pricing documentation, with CbCR being the highest-level report. The goal is to provide tax administrations with the necessary information to conduct effective risk assessments of transfer pricing and other BEPS-related risks.

Are there any exceptions to CbCR filing?

The primary exception is for MNE groups whose annual consolidated group revenue in the immediately preceding fiscal year is below the $850 million threshold. Additionally, certain governmental entities, international organizations, and non-profit organizations may be exempt. Specific details on these exemptions are found in Treasury Regulations Section 1.6038B-2(b)(2).

What is the role of the OECD in CbCR?

The OECD developed the CbCR standard as part of its BEPS project, providing guidance on its implementation and promoting international consistency. It facilitates the exchange of CbCR information between tax authorities of participating jurisdictions. The OECD's recommendations are largely adopted by countries, including the U.S., in their domestic CbCR legislation.

How does CbCR data get exchanged internationally?

CbCR data is exchanged internationally through bilateral or multilateral competent authority agreements, primarily based on the Multilateral Competent Authority Agreement on the Exchange of Country-by-Country Reports (CbC MCAA). This allows tax authorities to automatically exchange the CbC Reports filed by ultimate parent entities in their respective jurisdictions with other participating countries.

Will there be changes to CbCR in 2026?

While specific legislative changes for 2026 are not yet enacted, the global tax landscape is constantly evolving, particularly with the OECD's Pillar Two (global minimum tax) initiative. Pillar Two's Qualified Domestic Minimum Top-up Tax (QDMTT) and Income Inclusion Rule (IIR) will rely on similar jurisdictional data, potentially leading to alignment or integration with CbCR data requirements. MNEs should monitor legislative developments closely.

How does CbCR interact with Pillar Two (Global Minimum Tax)?

CbCR provides foundational jurisdictional data that is highly relevant for Pillar Two calculations, particularly for determining effective tax rates in each jurisdiction. While CbCR uses financial accounting data, Pillar Two requires specific adjustments to arrive at 'GloBE income' and 'adjusted covered taxes.' MNEs will likely leverage CbCR data as a starting point for Pillar Two compliance, but significant reconciliation will be necessary.

What is the 'surrogate parent entity' rule?

The 'surrogate parent entity' rule, outlined in Treasury Regulations Section 1.6038B-2(c), requires a U.S. business entity that is not the ultimate parent entity of an MNE group to file a CbC Report if certain conditions are met. These conditions typically arise when the foreign ultimate parent entity is not required to file a CbC Report in its jurisdiction or if there's no international agreement for the exchange of CbC Reports with the U.S.

Where can I find official IRS guidance on CbCR?

Official IRS guidance on CbCR can be found in Treasury Regulations Section 1.6038B-1 and 1.6038B-2, as well as the instructions for Form 8975 and Schedule A (Form 8975). The IRS also publishes FAQs and news releases on its website related to CbCR. Taxpayers should consult these primary sources for the most accurate and up-to-date information.

Country-by-Country Reporting (CbCR) — 2026 Guide

Overview: Understanding Country-by-Country Reporting (CbCR)

Country-by-Country Reporting (CbCR) is an international tax transparency initiative designed to provide tax administrations with a comprehensive overview of the global allocation of income, taxes paid, and certain indicators of economic activity among multinational enterprise (MNE) groups. Initiated by the Organisation for Economic Co-operation and Development (OECD) as part of its Base Erosion and Profit Shifting (BEPS) Action Plan 13, CbCR aims to enhance transparency and enable tax authorities to conduct high-level transfer pricing risk assessments. The United States, as a member of the OECD, has implemented its own regulations requiring U.S. MNEs to file CbC reports.

What is Country-by-Country Reporting (CbCR)?

CbCR requires large multinational enterprise (MNE) groups to report annually, on a country-by-country basis, financial and tax information for each tax jurisdiction in which they operate. This includes information relating to the global allocation of the MNE group’s income and taxes paid, along with certain indicators of the location of economic activity within the MNE group. The report also identifies all the constituent entities of the MNE group, their tax jurisdiction of residence, and the nature of their main business activities.

The primary goal of CbCR is to provide tax authorities with crucial data to assess transfer pricing risks and other BEPS-related risks. It helps identify whether MNEs are shifting profits to low-tax jurisdictions without corresponding economic activity. The information collected is exchanged between tax jurisdictions under bilateral competent authority arrangements, fostering international cooperation in tax matters.

Who Qualifies for CbCR?

In the United States, the ultimate parent entity of a U.S. Multinational Enterprise (MNE) Group is required to file a CbC report if its annual revenue for the relevant preceding annual reporting period was $850 million or more [1]. This threshold is critical for determining whether an MNE group falls within the scope of U.S. CbCR requirements. The reporting entity is typically the ultimate parent entity of the MNE group, which is defined as an entity that owns directly or indirectly a sufficient interest in one or more other entities such that the entity is required to prepare consolidated financial statements under accounting principles generally applied in its tax jurisdiction of residence, or would be so required if its equity interests were publicly traded on a stock exchange in its tax jurisdiction of residence.

It is important to note that while the U.S. threshold is $850 million, other jurisdictions may have different thresholds (e.g., €750 million in many OECD countries). U.S. MNE groups must be aware of these varying international requirements, as foreign subsidiaries could be subject to local filing requirements in certain circumstances, such as when the U.S. has not entered into a competent authority arrangement with that foreign jurisdiction or in cases of “systemic failure” [2].

How to Claim Country-by-Country Reporting (CbCR)

U.S. MNE groups that meet the revenue threshold are required to file Form 8975, Country-by-Country Report, and its accompanying Schedules A (Form 8975) with their annual income tax return [3]. Form 8975 cannot be filed as a standalone tax form. While paper returns are accepted, the IRS encourages electronic filing to ensure timely automatic exchange of CbC reports with partner jurisdictions. If filing electronically, Form 8975 and Schedules A must be attached electronically in the correct XML format, compatible with the Modernized e-File (MeF) system.

For each tax jurisdiction in which the MNE group operates, a separate Schedule A (Form 8975) must be filed, listing all constituent entities resident in that jurisdiction. At least two Schedules A must be attached to Form 8975, with one typically for the United States. If a U.S. MNE group has only fiscally transparent U.S. business entities, a Schedule A for "stateless" entities would be provided instead of one for the United States [4].

Amended reports are possible if a U.S. MNE needs to modify or correct a previously submitted Form 8975. In such cases, an amended Form 8975 and all Schedules A (including those not amended) must be filed with the amended tax return, using the same filing method (electronic or paper) as the original submission [5].

2026 Limits, Amounts, or Rates

For the 2026 tax year, the revenue threshold for filing a Country-by-Country Report in the United States remains at $850 million or more in annual revenue for the preceding annual reporting period. This threshold is consistent with previous years and aligns with the U.S. implementation of the OECD's BEPS Action 13 recommendations. There are no specific tax rates or amounts directly associated with CbCR itself, as it is a reporting requirement rather than a tax assessment. The report provides financial and tax data, including revenues, profits, income taxes paid and accrued, stated capital, accumulated earnings, and tangible assets other than cash, for each jurisdiction [6].

It is crucial for MNEs to monitor any potential changes to this threshold or reporting requirements that may be announced by the IRS or Treasury Department for future tax years. However, for the 2026 tax year, the $850 million revenue threshold is the primary determinant for the filing obligation.

Common Mistakes That Cost Taxpayers Money

Missing the Filing Threshold: Failing to accurately calculate the MNE group's annual revenue and thus missing the $850 million threshold, leading to non-compliance.
Incorrect or Incomplete Data: Providing inaccurate or incomplete financial and tax information on Form 8975 and Schedules A. This can lead to increased scrutiny from tax authorities and potential penalties.
Failure to File Electronically When Required: While paper filing is accepted, electronic filing is encouraged. MNEs filing electronically must ensure their XML format is compatible with the MeF system. Errors in electronic submission can lead to delays or rejection.
Not Filing Separate Schedules A for Each Jurisdiction: Each tax jurisdiction where the MNE group operates requires a separate Schedule A. Aggregating data incorrectly or omitting a Schedule A for a relevant jurisdiction is a common error.
Misunderstanding “Stateless” Entity Reporting: Misclassifying or incorrectly reporting U.S. LLCs or LPs that are considered “stateless” for CbCR purposes can lead to errors.
Ignoring Foreign Local Filing Requirements: Assuming U.S. filing satisfies all global obligations. Foreign subsidiaries may have local filing requirements if the U.S. has not established an exchange agreement or in cases of systemic failure.
Inadequate Documentation: Not maintaining robust internal documentation to support the data reported in CbC reports. This can hinder responses to tax authority inquiries.

IRS Code Section Reference

The primary IRS regulation governing Country-by-Country Reporting for U.S. multinational enterprises is found in Treasury Regulations §1.6038-4 [1]. This regulation outlines the requirements for filing Form 8975 and Schedules A, including the revenue threshold, definitions of MNE groups and constituent entities, and the information to be reported. Additionally, Revenue Procedure 2017-23 provides guidance on transitional filing options for early reporting periods [2].

A Strong Closing CTA

Navigating the complexities of Country-by-Country Reporting requires meticulous attention to detail and a deep understanding of international tax regulations. Ensure your MNE group is fully compliant and optimized for global tax efficiency. Don't leave your international tax strategy to chance. Book a consultation with Uncle Kam's expert tax strategists today to discuss your specific CbCR obligations and develop a robust compliance plan. Visit unclekam.com/consultation/ to schedule your personalized session.

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Country By Country Reporting

Overview: Understanding Country-by-Country Reporting (CbCR)

What is Country-by-Country Reporting (CbCR)?

Who Qualifies for CbCR?

How to Claim Country-by-Country Reporting (CbCR)

2026 Limits, Amounts, or Rates

Common Mistakes That Cost Taxpayers Money

IRS Code Section Reference

A Strong Closing CTA

References

Country By Country Reporting FAQs

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