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June 28, 2023
2023-1155

Ireland brings public country-by-country reporting requirements into effect

  • On 21 June 2023, the Minister for Enterprise, Trade and Employment (the Department) signed the Irish statutory instrument1 implementing public country-by-country reporting (Public CbCR) into Irish law.
  • Public CbCR will apply to the first financial year commencing on or after 22 June 2024 and a report will be required to be published within 12 months of the date of the balance sheet for the relevant financial year.

Executive summary

The Minister for Enterprise, Trade and Employment, Simon Coveney, signed the "European Union (Disclosure of income tax information by certain undertakings and branches) Regulations 2023" (Public CbCR Regulations) on 21 June 2023. The Public CbCR Regulations transpose the EU Directive 2021/2101/EU into Irish law.

The Public CbCR Regulations require undertakings with revenue as reflected in the financial statements or consolidated financial statements exceeding €750 million in each of the preceding two consecutive financial years2 to publicly disclose corporate tax information for each European Union (EU) Member State, each jurisdiction on the EU list of non-cooperative jurisdictions3 and aggregated data for all other countries.

The undertaking must publish the report on its own website unless it makes the report available to public on the website of the Companies Registration Office, in which case the company must reference this on its own website and provide information on where the report can be found.

Commenting on the commencement of the Public CbCR Regulations, Minister of State Dara Calleary, who is responsible for Company Regulation, stated that:

The regulations increase corporate transparency, enhance public scrutiny, and afford an opportunity for multinational enterprises to show the contribution made by their presence in the EU. This helps ensure trust in the fairness and transparency of our tax system and safeguards a level playing field between EU and non-EU multinationals.

Detailed discussion

Background and covered enterprises

The reporting requirements apply to undertakings with consolidated turnover exceeding €750 million in each of the preceding two consecutive financial years. There are exemptions for undertakings operating exclusively in a single EU Member State and no other jurisdiction, foreign parented groups with an Irish subsidiary that is not a medium-sized or large undertaking,4 and foreign parented groups with an Irish branch that had a net turnover in the preceding two consecutive financial years below €12 million.

If the information is not available to the Irish subsidiary or Irish branch of a foreign parented group, the Public CbCR Regulations require that the branch/subsidiary request this detail from the ultimate parent. Where the ultimate parent fails to provide the requested information, the subsidiary or branch must publish a report of all the income tax information available and disclose that the ultimate parent did not provide the necessary information.

Information to be disclosed

Undertakings falling within the scope of the Public CbCR Regulations will be required to publicly disclose information separately on a country-by-country basis for each EU Member State and each jurisdiction on the EU list of non-cooperative jurisdictions. For all other jurisdictions, it is sufficient for aggregated data to be disclosed.

The report should disclose information relating to all activities of the undertaking and, where relevant, each affiliated undertaking included in the ultimate parent's consolidated financial statements for the relevant financial year. The report should include the following details:

  • The name of the ultimate parent undertaking
  • The financial year to which the report relates
  • The currency used for presentation of the report
  • A list of all subsidiary undertakings consolidated in the ultimate parent undertaking's financial statements for the relevant financial year, established in the EU or in tax jurisdictions included in Annexes I and II to the Council conclusions on the revised EU list of noncooperative jurisdictions for tax purposes (i.e., the EU "black list"5 and "grey list"6)
  • A brief description of the nature of the activities of the undertaking
  • The number of full-time equivalent employees of the undertaking
  • The revenues, including from intercompany transactions, calculated in either of the following ways:
    • The sum of
      • Net turnover
      • Other operating income
      • Income from participating interests, excluding dividends received from affiliated undertakings
      • Income from other investments and loans forming part of the fixed assets
      • Other interest receivable and similar income
    • Or the income as defined by the financial reporting framework that form the basis for preparing the financial statements, excluding value adjustments and dividends received from affiliated undertakings
  • The amount of profit or loss before income tax
  • The amount of income tax accrued during the financial year to which the report relates, calculated as the current tax expense (not including deferred taxes or provisions for uncertain tax liabilities) recognized on the undertaking's taxable profits or losses of the financial year by undertakings and branches in each tax jurisdiction in which income tax is accrued
  • The amount of income tax that undertakings and branches paid on a cash basis during the financial year in each tax jurisdiction in which income tax is accrued (including withholding taxes that other undertakings pay with respect to payments to the group's undertakings and branches)
  • The sum of the profits that have not yet been distributed from past financial years and the financial year to which the report relates:
    • In the case of a branch — the undertaking that established, opened, registered or incorporated the branch in the State
    • In the case of any undertaking other than a branch — the undertaking

An undertaking may elect to report the information prepared under the EU directive7 applicable to CbCR to tax authorities instead of the information above.

It is possible to exclude information that an undertaking believes would seriously prejudice its competitive position. Detailed requirements must be met in that situation, including a reasoned explanation for nondisclosure and a requirement that the omitted information is published in a subsequent report within five years of the original omission. It is not possible to exclude information for a company on the EU black or grey list.

Where a reportable undertakings' financial statements are required to be audited, the audit report must state whether the enterprise was in-scope for the preceding year and if the report was published.

Entry into effect

The Public CbCR Regulations will apply from the first financial year beginning on or after 22 June 2024. The enterprises that fall within the scope of reporting will be required to report within 12 months of the balance sheet date for the relevant financial year.

Penalties

The directors of the company or authorized persons of a branch have collective responsibility to ensure that the report on tax information is drawn up, published, and made accessible to the public.

A person (except the statutory auditor) who fails to comply with the EU Regulations will be guilty of a category 3 offense (i.e., a summary offence, which on conviction may involve a term of imprisonment of up to six months or a "Class A fine" not exceeding €5,000).

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For additional information with respect to this Alert, please contact the following:

Ernst & Young (Ireland), Dublin

Ernst & Young (Ireland), Financial Services, Dublin

Ernst & Young (Ireland), Cork

Ernst & Young (Ireland), Limerick

Ernst & Young (Ireland), Waterford

Ernst & Young (Ireland), Galway

Ernst & Young LLP (United States), Irish Tax Desk, New York

Ernst & Young LLP (United States), Irish Tax Desk, San Jose

Published by NTD's Tax Technical Knowledge Services group; Carolyn Wright, legal editor

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ENDNOTES

1 European Union (Disclosure of income tax information by certain undertakings and branches) Regulations 2023

2 This differs from the single-year test for the filing of CbCR reports with tax authorities.

3 https://data.consilium.europa.eu/doc/document/ST-6375 — 2023-INIT/en/pdf.

4 Medium-sized undertakings do not exceed the limits of at least two of the three following criteria on their balance sheet date: (a) balance sheet total: €20 million; (b) net turnover: €40 million; (c) average number of employees during the financial year: 250.

5 The EU black list is a list of non-cooperative jurisdictions published in the conclusions adopted by the Ecofin Council ("Annex I").

6 The EU grey list is a list of jurisdictions that do not yet comply with all international tax standards but have committed to implementing reforms ("Annex II").

7 Council Directive 2011/16/EU.

 

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