IRS Inks Tax Deals to Exchange Reports With Three More Nations

The Tax Management Transfer Pricing Report ™ provides news and analysis on U.S. and international governments’ tax policies regarding intercompany transfer pricing.

By Alex M. Parker

The IRS has signed agreements with New Zealand, South Africa, and Iceland to implement new global reporting standards, bringing the total number of jurisdictions to five, according to an official from the agency.

The Internal Revenue Service previously announced it had signed competent authority agreements with Norway and the Netherlands. The agreements are to exchange country-by-country reports filed by taxpayers in both jurisdictions, as part of a new disclosure framework from the Organization for Economic Cooperation and Development.

Deborah Palacheck, director of treaty administration at the IRS Large Business and International division, said the agency is currently working with other jurisdictions “in the active signatory process,” and others that are close to coming together for an agreement.

She also said the agency plans to announce which countries it’s working with. She spoke during a panel discussion at a tax conference sponsored by Bloomberg BNA and Baker McKenzie in Washington on June 7.

“We’re also having bilateral discussions with countries as to—if we’re not going to sign in the very near future—could we put out some other public statement to give assurance that we will have the CAA in effect at a later time,” she said.

Many companies are navigating the “gap year” problem with the country-by-country reporting scheme, as the U.S. rules are effective for tax years beginning after June 30, 2016—six months later than many other countries participating in the program. The gap raises concerns that companies may have to file the reports to each individual country where they are present. The U.S. agreed to accept voluntary reports for the period, but it is not yet clear whether they will have agreements in place to distribute them by the end of the year, when many of them must be filed according to foreign countries’ deadlines.

Smooth System

Robert Stack, the former deputy assistant secretary for international tax affairs at the Department of Treasury, who was a U.S. delegate to the OECD during the project that formed these rules, said he expects the reporting system to run smoothly. He also spoke during the conference panel.

“The agreement itself is not like negotiating a tax treaty. It’s a relatively mechanical document on the mechanics of exchange,” he said. “I would be really surprised if we get to the end of the year and there’s a bunch of hiccups. Because it’s in the global community’s interest to not have a U-turn in December, and they need to gear up the local file requirements. So everybody’s kind of on the same page.”

To contact the reporter on this story: Alex M. Parker in Washington at aparker@bna.com

To contact the editor responsible for this story: Molly Moses at mmoses@bna.com

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