In a good sign for U.S.-based MNEs concerned about the potential disclosure issues that surround the filing of country by country reports (CbCR), the IRS confirmed on April 28th that it has concluded two competent authority agreements for CbCR, one with the Netherlands and the other with a country that Douglas O’Donnell, the U.S. Competent Authority who confirmed the signings to Bloomberg BNA, did not name.
The Netherlands agreement was posted on the IRS.gov web page on May 17, and it appears that it is nearly identical to the Model Agreement. The only difference between the Model and the Netherlands agreement is the definition of “constituent entity.” The Model included a multi-part definition that sought to separately describe separate business units that are included in consolidated financial statements, separate business units that are excluded from consolidated financial statements and permanent establishments. The agreement simply defines “constituent entity” as it is defined in the respective domestic laws of the Netherlands and the United States. Given the complexity of the original definition it is likely that the approach taken in the Netherlands agreement will be taken in all the other agreements. It is still an open question which other country has signed an agreement with the United States or whether the other country is also in Europe or in some other region of the world. Nevertheless, it is good news that the IRS is getting some agreements in place in advance of the first exchange of CbCRs, which under the CbC MCAA signed by 57 countries (and counting) are anticipated to be exchanged in early 2018.