Ireland Implements Public Country-by-Country Reporting to Enhance Corporate Transparency

On 21 June 2023, 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) into Irish law. This move aims to increase corporate transparency, promote public scrutiny, and ensure a level playing field between EU and non-EU multinationals. The Public CbCR Regulations, which implement the EU Directive 2021/2101/EU, require qualifying undertakings to disclose corporate tax information publicly. Let’s delve into the details of this significant development.

The Public CbCR Regulations apply to undertakings with consolidated turnover exceeding €750 million in each of the preceding two consecutive financial years. Certain exemptions exist for undertakings operating solely within a single EU Member State, foreign parented groups with an Irish subsidiary that is not classified as medium-sized or large, and foreign parented groups with an Irish branch with a net turnover below €12 million in the preceding two financial years.

Qualifying undertakings falling under the Public CbCR Regulations will be required to disclose information on a country-by-country basis for each EU Member State and each jurisdiction on the EU list of non-cooperative jurisdictions. For other jurisdictions, aggregated data will suffice.

The report must contain crucial details, including the name of the ultimate parent undertaking, the financial year covered, the currency used, a list of subsidiary undertakings consolidated in the ultimate parent’s financial statements, a description of the activities, the number of full-time equivalent employees, revenues, profit or loss before income tax, income tax accrued and paid, and unappropriated profits from past financial years.

Undertakings have the option to report the information prepared under the EU directive applicable to Country-by-Country Reporting (CbCR) to tax authorities instead of the specified requirements.

To maintain competitiveness, an undertaking may exclude certain information that could seriously prejudice its competitive position. However, strict conditions must be met, including a reasoned explanation for the omission and a requirement to publish the omitted information in a subsequent report within five years, with no exemptions for companies on the EU black or grey list.

The Public CbCR Regulations will be effective for the first financial year commencing on or after 22 June 2024. Qualifying undertakings must publish their reports within 12 months of the balance sheet date for the relevant financial year.

Penalties are in place to ensure compliance. Directors or authorized persons of a company or branch collectively bear the responsibility for drawing up, publishing, and making the tax information report accessible to the public. Failure to comply with the EU Regulations may result in a category 3 offense, punishable by imprisonment of up to six months or a Class A fine not exceeding €5,000.

Ireland’s implementation of Public Country-by-Country Reporting through the Public CbCR Regulations marks a significant step toward enhancing corporate transparency and fostering public trust. This move not only enables multinational enterprises to demonstrate their contributions to the EU but also ensures a level playing field between EU and non-EU multinationals. By promoting corporate accountability and disclosure, Ireland aims to safeguard the fairness and transparency of its tax system while encouraging global business operations to uphold ethical and responsible practices.