Public Country-by-Country Reporting requirements take effect in Ireland

Minister for Enterprise, Trade and Employment, Simon Coveney brought about the European Union (Disclosure of income tax information by certain undertakings and branches) Regulations 2023 on 22 June 2023. That’s a long title but the short version means that public country-by country (CbC) tax reporting obligations have landed in Ireland for certain multinational enterprises.

Announcing the commencement of the regulations, Minister of State Dara Calleary noted that “…I am pleased to announce the taking effect of the public country-by-country tax reporting regulations, which require for the first time that non-EU multinationals with significant turnover, doing business in the EU must comply with the same tax reporting obligations as EU multinationals. 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.”

Minister Calleary continued that “Ireland has long been a supporter of corporate transparency and good governance in the interests of all stakeholders including employees, investors, competitors and the general public, the new regulations support our ambitions in this regard”.

I was discussing the matter with my fellow tax partners, Kevin Norton and Ronan Ferry. CbC has been around for a while now, but with it going public then this is a significant change and these guys have been looking at CbC since it was born.

The Regulations transpose the related EU Directive (as regards disclosure of income tax information by certain undertakings and branches) into Irish law. Although public CbC has landed in Ireland it only applies to financial years starting on or after 22 June 2024. So, from an Irish law perspective, companies within scope who follow a calendar year, 2025 will be the first reportable year, with the report to be published by 31 December 2026. Some countries have brought about earlier deadlines.

The reporting obligations, subject to certain exemptions, will apply to the Irish ultimate parent or standalone undertakings (generally “companies” for ease of reference), where the revenue on the undertaking’s balance sheet date, as reflected in its financial statements or consolidated financial statements, as the case may be, exceeds €750,000,000 in each of 2 consecutive financial years. They will also apply to certain Irish subsidiaries and branches of non-EU multinational enterprises, unless the non-EU ultimate parent chooses to take on the reporting responsibility.

These companies must make a public CbC report or a statement publicly available, containing corporate tax, financial and other information on the activities performed in each of the countries in which they operate. The report must be published no later than 12 months after the end of the financial year in question (depending on what countries the MNE currently operates within), either on their own website or that of the Companies Registration Office. It must be publicly available free of charge in English and/or Irish and remain available free of charge for at least 5 years from the date of the publication.

The public CbC report must include the following information:

• Total Revenue (related & unrelated party);
• Profit before tax;
• Income taxes (paid and current tax accrued) for each jurisdiction;
• Accumulated Earnings;
• Number of employees (on an FTE basis);
• Name of ultimate parent/standalone undertaking;
• List of all affiliated undertakings of the MNE group and activities;
• Year for which financial information is being presented; and
• Currency of financial information presented.

This information must be disclosed separately by tax jurisdiction for each country in the EU, and each country on the EU list of non-cooperative jurisdictions. For all other countries, the information above can be presented in aggregate.

Ireland, has also chosen to allow companies the option to defer the disclosure of certain commercially sensitive information for up to five years where in the opinion of the company, the inclusion of specific items of information would “seriously prejudice the undertaking’s competitive position.” However, similar information for non-cooperative tax jurisdictions can never be omitted.

The collective responsibility for ensuring compliance with the public CbC reporting obligations lies with the reporting company’s directors/management/authorised persons etc. Relevant persons who fail to comply with the regulations shall be guilty of a category 3 offence which essentially means a fine of up to €5,000 and/or up to 6 months imprisonment.

Furthermore, where the reporting company’s financial statements are required to be audited, the audit report must also state whether the undertaking was in scope for the preceding year and if the report was published. The reporting obligations will not apply to groups operating solely within a single EU Member State or to Irish branches whose net turnover does not exceed €12 million for the last two consecutive financial years.

There are a number of areas which MNE’s should consider in preparing for public CbC reporting. For example, an MNE’s CbC reportable information can be the starting point for the preparation of the public CbC report. Therefore, MNE’s need to be comfortable with how their CbC reportable data is currently being captured and presented.

Groups need to consider their global operations when determining their reporting obligations with respect to public CbC reporting. Depending on the countries in which the groups operate, their obligations with respect to publishing public CbC reportable information in respect of the group may vary. For example, certain EU Member States deem accounting periods starting on or after 1 January 2023 reportable for public CbC purposes (with full public CbC information for the group being reportable).

While domestic provisions governing CbC reporting have been in place in Irish law for some time, public CbC reporting represents the first time for many groups that this reportable information will be made publicly available. Corporate groups should consider how this information, once public, could be interpreted and whether they would like to publish additional narrative to accompany the numbers presented. In short, this is now a European requirement and corporate groups will have never seen before obligations that will have to be addressed.
 

Please note this article first featured in the Business Post on Sunday, 9 July 2023 and was re-published kindly with their permission on our website.