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

The European Union (Disclosure of Income Tax Information by Certain Undertakings and Branches) Regulations 2023 (the ‘Regulations’) came into operation on 22 June 2023.

The Regulations transpose Directive 2021/2101/EU (the ‘Directive’), which relates to the disclosure of certain tax related information by certain undertakings and branches, into Irish law. This effectively gives effect to public country-by country (‘pCbC’) reporting obligations in Ireland for certain multinational enterprises (‘MNE’s’). Other EU Member States were required to transpose the Directive into their national law by 22 June 2023 and this has been done with some notable variations which affect the overall timing of reporting for MNE’s.

The Regulations apply to financial years starting on or after 22 June 2024. For companies within scope who follow a calendar year, 2025 will be the first reportable year under the Regulations, with the report to be published by 31 December 2026 (subject to change depending on what countries the MNE operates within which is discussed in more detail below).

Key features of the new pCbC reporting requirement

The pCbC reporting obligations under the Regulations, subject to certain exemptions, will apply to Irish ultimate parent or standalone undertakings (‘companies’ for ease of reference hereafter), with turnover exceeding €750 million in the last two consecutive financial years. They will also apply to Irish subsidiaries and branches of non-EU MNEs, unless the non-EU ultimate parent chooses to take on the reporting responsibility.

These companies must make a pCbC 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 (subject to change depending on what countries the MNE currently operates within which is discussed in more detail below), either on their own website or on the website of the Companies Registration Office (‘CRO’). It must be publicly available free of charge in English and/or Irish and remain available free of charge in English and/or Irish for at least 5 years from the date of the publication.

The pCbC 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 a brief description of their activities;
• Year for which financial information is being presented; and
• Currency of financial information presented.

The information above 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 pCbC 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.

Deloitte Ireland Comments

In preparation for pCbC reporting, there are a number of areas which MNE’s should consider;

1. How CbC reportable data is currently captured & presented

MNE’s CbC reportable information can be the starting point for the preparation of the pCbC report. As such, it is imperative that MNE’s are comfortable with how their CbC reportable data is currently being captured and presented. For many groups this exercise is currently being undertaken due to the prominence that CbC reportable information has gained in applying the Safe Harbour regulations for Pillar II.

2. If additional narrative should be published with the reportable pCbC data

While domestic provisions governing CbC reporting have been in place in Irish law for some time, pCbC reporting represents the first time for many groups that this reportable information will be made publicly available. This is causing groups to consider how this information, once public, could be interpreted and if they would like to publish additional narrative to accompany the numbers presented.

3. How pCbC reportable data compares to existing publicly available information for the group

For many groups, certain financial and tax related information is already publicly available. As such, groups are considering the need for additional controls to establish how pCbC reportable information compares to other publicly available information related to the group, at global, regional and local country levels.

4. Timing of pCbC Reporting

Groups need to consider their global operations when determining their reporting obligations with respect to pCbC reporting. Depending on the countries in which the groups operate, their obligations with respect to publishing pCbC reportable information in respect of the group may vary e.g.:

• For certain groups with operations in Romania, accounting periods starting on or after 01 January 2023 (rather than 22 June 2024) are reportable for pCbC purposes (with full pCbC information for the group being reportable)
• Groups with operations in Spain are expected to publish their pCbC reportable data for the group within 6 months of year end (as opposed to the 12 months as outlined in the Directive)

This may require MNE’s to change the timing, data and processes for preparing CbC information so that pCbC information can be prepared in time.

pCbC reporting may impact on MNE’s current tax operations and even tax strategy. With a reporting year starting for some MNE’s as early as January 2023, now is the time to start looking at your current CbC reporting process, considering the potential impact of the publication of the above information on the business, and ensuring you are ready to report accurately and on time.

Please note this article was first published on 4 July 2023.