EY’s Global Tax Alert, referenced herein, provides a summary of the latest US international tax developments, including the exchange of BEPS related information.
US recently finalized two model competent authority agreements that will be used for exchanging country-by-country (CbC) reports. One model will apply to information exchanged under US tax treaties, the other will be used with US tax information exchange agreements (TIEAs). A tax treaty or TIEA serves as the legal basis for the exchange of tax information in the CbC reports.
Most importantly, the US has two requirements for countries exchanging CbC reports under OECD’s Action 13: (1) a legal instrument authorizing the exchange, and (2) adequate data security. With respect to the security prerequisite, this presents uncertainty as to which countries are not considered to have the requisite security. However, will this “list” be communicated in advance so MNE’s are in compliance with that country’s laws requiring the submission of CbC data? This should be a forethought, rather than an afterthought, to the process.