Country-by-country reporting requirements apply to multinational enterprise groups with consolidated revenue of €750 million or more (or $850 million for U.S.-parented groups), and compel them to file an annual report breaking down income, taxes paid, employees, and assets in every jurisdiction where they operate.1OECD. Country-by-Country Reporting for Tax Purposes2Internal Revenue Service. About Form 8975, Country by Country Report Over 120 jurisdictions have adopted the rules, and the data moves automatically between tax authorities under exchange agreements built to surface profit shifting.
Who Has to File
The obligation turns on one number: total consolidated group revenue in the fiscal year immediately before the reporting year. For U.S.-parented groups, the IRS fixed the threshold at $850 million. For most other jurisdictions, the figure is €750 million. A group reporting for its 2025 fiscal year looks at 2024 consolidated revenue to decide whether it must file.
Revenue here means all sales, service income, and other revenue reflected in the consolidated financials after eliminating intra-group transactions. The threshold is a bright line. One dollar above $850 million and the group must report every data point for every jurisdiction.
The entity on the hook is the Ultimate Parent Entity (UPE), the top-level company that controls the group and prepares the consolidated financial statements. The UPE files in its home jurisdiction. Every other company, branch, or permanent establishment inside the consolidated group is a Constituent Entity, and each one appears in the report regardless of size or profitability.
A U.S.-parented group over the threshold must file whether or not it has foreign tax disputes. Going the other direction, a U.S. subsidiary of a foreign-parented group may carry its own local filing obligation if the parent’s jurisdiction lacks a proper exchange arrangement with the United States.
Where CbCR Sits in Transfer Pricing Documentation
The country-by-country report is one layer of a three-tier framework the OECD built under BEPS Action 13. The Master File gives a high-level view of the group’s global operations, structure, intangibles, and transfer pricing policies. The Local File documents the specific intercompany transactions affecting a particular country, including the arm’s-length analysis. The CbC report sits on top as aggregate jurisdiction-level data.3OECD. Transfer Pricing Documentation and Country-by-Country Reporting, Action 13 Final Report
Tax authorities use the CbC report as a screening tool to flag jurisdictions where reported profits look out of proportion to economic activity. It is deliberately high-level and should not serve, on its own, as the basis for a tax adjustment.
What Goes in the Report
The report uses three standardized tables, so authorities worldwide receive the same format.
Table 1: Financial and Tax Data by Jurisdiction
Table 1 requires aggregate financials for all group entities within each tax jurisdiction. Revenue is split into two categories: transactions with unrelated outside parties and transactions with related group companies. That split is the most immediately useful signal in the report, because heavy reliance on related-party revenue in a low-tax jurisdiction raises transfer pricing questions.
Table 1 also requires profit or loss before income tax and two tax figures: income tax paid in cash during the year and income tax accrued as a current-year expense. Reporting both lets authorities see timing differences and the real tax burden.
The remaining fields measure economic substance: stated capital, accumulated earnings, number of employees (headcount or full-time equivalent), and tangible assets other than cash. These let authorities ask whether a jurisdiction with large reported profits also has the people, infrastructure, and capital to justify them.
Table 2: Entity List and Business Activities
Table 2 lists every Constituent Entity, its jurisdiction of tax residence, and (for branches) the jurisdiction of the owning entity. The most scrutinized field is business activity classification. The OECD provides a fixed set of categories that must be applied consistently: research and development, holding or managing intellectual property, purchasing and procurement, manufacturing, sales and marketing, distribution, administrative and management services, internal group finance, and others.
Flagging an entity’s sole function as “holding or managing intellectual property” in a low-tax jurisdiction is exactly the pattern the report was built to surface. Expect follow-up.
Table 3: Explanatory Notes
Table 3 is the narrative. Identify the source of the figures (consolidated financial statements, statutory accounts, or internal management accounts), note accounting standard differences such as U.S. GAAP versus IFRS, and explain unusual items that might otherwise look like red flags. A well-drafted Table 3 can prevent audits that raw numbers alone would invite.
Currency for U.S. Filers
All amounts on Form 8975 and Schedule A must be stated in U.S. dollars. The default expectation is that the group uses the exchange rate methodology consistent with U.S. GAAP. Any deviation must be disclosed in Part III of the relevant Schedule A.4Internal Revenue Service. Instructions for Form 8975 and Schedule A (Form 8975)
How U.S. Groups File and When
U.S.-parented groups file on IRS Form 8975 with a Schedule A for each jurisdiction. The form is attached to the UPE’s income tax return and is due on the return’s due date, including extensions.5eCFR. 26 CFR 1.6038-4 – Information Returns Required of Certain United States Persons The IRS instructions are explicit that Form 8975 is not filed separately from the income tax return.4Internal Revenue Service. Instructions for Form 8975 and Schedule A (Form 8975)
The OECD standard allows up to 12 months after the end of the reporting fiscal year, but U.S. filers run on the income tax return deadline. A calendar-year corporation on extension would typically have until October 15 of the following year.
The reporting period covered by Form 8975 is generally the 12-month period of the UPE’s applicable financial statement that ends with or within its tax year. If the UPE does not prepare an annual financial statement, the reporting period defaults to the 12-month period ending on the last day of its tax year.5eCFR. 26 CFR 1.6038-4 – Information Returns Required of Certain United States Persons
Surrogate Parent Filing
A group can designate a Constituent Entity other than the UPE to file. That entity becomes the Surrogate Parent Entity (SPE) and takes on the same responsibilities and deadlines the UPE would carry in its home jurisdiction. Groups typically use an SPE when the UPE’s home country does not require CbCR or has systemic problems with its exchange mechanism.
Notification
In most CbCR jurisdictions, every Constituent Entity must notify its local tax authority which group entity is actually filing the report, whether the UPE, an SPE, or the entity itself under local filing. That notification deadline is often earlier than the report deadline. In the United States, notification is handled through the filing of Form 8975 and an attached statement to the income tax return identifying the reporting entity.4Internal Revenue Service. Instructions for Form 8975 and Schedule A (Form 8975)
When Local Filing Is Required
The default is a single filing by the UPE or SPE, with automatic exchange to other jurisdictions handling the rest. Local filing is the fallback. A Constituent Entity must file directly with its local tax authority when any of the following is true:
- The UPE’s home country has not adopted CbCR.
- The UPE’s jurisdiction and the Constituent Entity’s jurisdiction lack a qualifying Competent Authority Arrangement for automatic exchange.
- The UPE’s jurisdiction has signed exchange agreements but is not actually delivering reports on time (systemic failure).
For a U.S. subsidiary of a foreign-parented group, local filing on Form 8975 is required when the foreign UPE sits in a jurisdiction without a qualifying Competent Authority Arrangement with the U.S. Treasury. The IRS publishes a jurisdiction status table listing countries that have signed or are negotiating exchange agreements with the United States.6Internal Revenue Service. Country-by-Country Reporting Jurisdiction Status Table Checking that table before each filing cycle is the simplest way to confirm whether local filing applies.
Penalties for Missing or Late Filings
Failing to file Form 8975, or filing late or incomplete, triggers penalties under Section 6038 of the Internal Revenue Code. The initial penalty is $10,000 for each annual reporting period for which the required information is missing. If the failure continues more than 90 days after the IRS mails a notice, an additional $10,000 accrues for each 30-day period (or partial period) the failure continues, up to a maximum additional $50,000.7Office of the Law Revision Counsel. 26 USC 6038 – Information Reporting With Respect to Certain Foreign Corporations and Partnerships Total exposure for a single reporting period can therefore reach $60,000 before any collateral consequences.
A reasonable cause defense is available. The IRS evaluates it case by case, looking at whether the filer acted responsibly before and after the failure, requested extensions when possible, corrected errors promptly, and had legitimate mitigating circumstances such as being a first-time filer or facing issues beyond its control.8Internal Revenue Service. Penalty Relief for Reasonable Cause A group that catches a late or incomplete filing and moves quickly to correct it is in a far stronger position than one that lets IRS notices pile up.
Penalties aren’t the only cost. CbC data feeds risk assessment models in every jurisdiction where the group operates. A missed filing gives those authorities a reason to look harder at everything else.
The EU Public Disclosure Rule Is Separate
CbCR filed with tax authorities is confidential. The EU has layered on a second, public reporting obligation that catches many of the same groups and is often confused with the OECD regime.
Under Directive 2021/2101, for fiscal years beginning on or after June 22, 2024, qualifying multinationals must publicly disclose income tax information on a country-by-country basis.9EUR-Lex. Directive (EU) 2021/2101 The report is posted on a website and kept freely accessible for at least five years. The revenue threshold mirrors the OECD standard: consolidated group revenue above €750 million for each of the two most recent consecutive fiscal years.
The directive reaches non-EU-parented groups, including U.S. multinationals, when they have at least one medium-sized or large subsidiary or a qualifying branch in an EU member state. The responsible EU subsidiary or branch must publish the report within 12 months of the fiscal year-end in an official EU register and on a company website, in a machine-readable format. The content overlaps heavily with Table 1 of the confidential CbC report, but it is visible to competitors, investors, journalists, and the general public. Member states were required to transpose the directive by June 22, 2023, with the first public reports due in 2025 and 2026 depending on fiscal year timing.
If your group files a confidential CbC report, assume the EU public report is a parallel workstream, not a byproduct. The data generation is similar; the operational challenge is managing what disclosure means commercially and reputationally.