A keystone in addressing base erosion and profits shifting (BEPS) is ensuring transparency. To make this possible, certain multinational enterprises (MNEs) are required to submit a Country-by-Country (CbC) report, as introduced in BEPS Action 13. For Ireland in particular, this requirement came in to effect from 1st of January 2016. Any business or organization that was calculating their financial statements on or after this date had to comply by the rules of the CbC reporting format. As a country, Ireland also signed a multilateral agreement (along with 30 other countries) allowing for the automatic exchange of “country by country” (CbC) reports with other participating jurisdictions.
Who has to submit?
An Irish tax resident company which is an ultimate parent entity, surrogate parent entity or designated entity of an MNE Group is required to file CbC Reports in Ireland. Under some circumstances, the above- mentioned entities, may be required to file an Equivalent CbC Report as part of a secondary reporting mechanism.
What needs to be submitted?
A CbC Report for an Irish MNE Group belonging to a particular jurisdiction is mandated to submit the following information:
- A sum-total and aggregate of,
- Revenue collected – unrelated party revenue, related party revenue and total revenue;
- profit or loss prior to income tax liability,
- amount paid in income tax,
- accrued income tax amount,
- stated capital,
- accumulated earnings,
- employee count, and
- value of tangible assets other than cash or cash equivalents
In case an Equivalent CbC Report is to be submitted, the threshold of information required to be included in that report is within the possession of and is obtained or acquired by a domestic constituent entity. Under a secondary reporting mechanism, an Irish tax resident domestic entity that is not able to provide a full CbC report for the MNE Group, is required to include:
- all information that it can furnish about the company and it’s working and
- all information over which it has an enforceable legal right to obtain from other group entities
How to file?
The report is to be made available to the authorities by the end of the fiscal year. All notifications must be made no later than the last day of the fiscal year for which the CbC Report is being filed. Failure to comply with the relevant reporting deadline could trigger a penalty of €19,045 and in some cases a further penalty of €2,535 per day until the CbC report is submitted. The notification is usually submitted electronically.
Submitting a CbC report can be demanding. As Ireland is also an early adopter of the OECD’s legislation on CbC reporting, most companies are yet in the dark about the whole process and what it entails.
Systems readiness is a key challenge. In the presence of errors and misstatements, there may be a requirement that data is verified or peer checked before submission to the authorities. This makes way for increase in costs for compliance. Sometimes, data disclosed to the authorities may have anomalies or may need extra information and documentation to substantiate claims. This may be a struggle to identify and rectify.
Legislations also come with a host of financial jargon and definitions that organizations find it arduous to decode as the explanations are not very readily available.
In the light of these challenges, it becomes integral to choose a trusted, experienced and proficient firm like DataTracks to help your organization navigate this key financial landscape. We will not only determine your need to comply with the legislation but will also assist with extraction and consolidation of data and provide feedback on interpretation of a prepared CbC report.
Compliance is our competence. Get in touch at firstname.lastname@example.org