The Information Exchange
Along with other tax authorities around the world, the IRS will be on the lookout for base erosion and profit-shifting by multinational companies when reviewing transfer pricing documentation. In fact, the IRS is already putting tools in place. The country-by-country report is perhaps one of the most revealing pieces of transfer pricing documentation, because it’s shared among tax authorities. The US has recently announced two more exchange agreements—one with Germany, one of its largest trade partners, and the other with Monaco.
The US agreement with Monaco was reached in early November with respect to fiscal years beginning on or after January 1, 2018. The US and Germany are still negotiating a final agreement, but for the moment have settled on exchanging reports relating to fiscal years beginning on or after January 1, 2019 and before January 1, 2020. The competent authorities didn’t want to waste time waiting for negotiations to conclude, claiming that assessing risk revealed in the reports is “critical.”