U.S. and Belgium sign an agreement on the exchange of country-by-country reports

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According to an IRS announcement on its website, the competent authorities of U.S. and the Belgium have concluded an arrangement on the exchange of Country-by-Country Reports. The competent authority arrangement (CAA) for exchange of country-by-country reports is on the basis of a double tax convention (DTC). The agreement was signed on 20 July 2017.

Under the arrangement, both countries intend to increase international tax transparency and improve access of their respective tax authorities to information regarding the global allocation of the income, the taxes paid, and certain indicators of the location of economic activity among tax jurisdictions. The CbC report is one element of a standardized approach to transfer pricing documentation which is intended to provide tax administrations with relevant and reliable information to perform an efficient and robust transfer pricing risk assessment analysis. The report includes information regarding the group’s activities in each country in which it operates, including, revenue, and profit before tax, taxes paid, taxes accrued, number of employees, and other information on economic activity. The country-by-country report is typically filed in the parent’s country of residence and then shared with other countries.

The first fiscal year for which the U.S. and Belgium intend to exchange CbC Reports is for the fiscal years of MNE Groups commencing on or after January 1, 2016. The CbC report is intended to be exchanged as soon as possible and no later than 18 months after the last day of the fiscal year of the MNE Group to which the CbC Report relates. CbC Reports with respect to fiscal years of MNE Groups commencing on or after January 1, 2017 are intended to be exchanged as soon as possible and no later than 15 months after the last day of the fiscal year of the MNE Group to which the CbC Report relates.

The Competent Authorities intend to exchange the CbC Reports automatically through a common schema in Extensible Markup Language (XML). The Competent Authorities intend to work toward deciding on one or more methods for electronic data transmission including encryption standards.

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