Revenue Note for Guidance

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Revenue Note for Guidance

111AKA Simplified calculations safe harbour

Summary

This section provides the rules for allowing a simplified income, revenue and tax calculation to be used by eligible groups for non-material constituent entities (“NMCE”) to be applied under the framework of what is termed the “Simplified Calculations Safe Harbour”.

Details

Definitions

(1) Introduces definitions relating to simplified calculations safe harbour:

“CbC report” has the same meaning as in section 111AJ(1);

“non-material constituent entity” means a constituent entity, including its permanent establishments, that is a member of an MNE group or large-scale domestic group, as the case may be, and that is not consolidated on a line-by-line basis in the ultimate parent entity’s consolidated financial statements solely on size or materiality grounds, provided that:

  1. the consolidated financial statements are consolidated financial statements to which paragraph (a) or (c), as the case may be, of the definition of that term in section 111A(1) applies,
  2. the consolidated financial statements are audited by an external independent auditor and that auditor’s opinion on the consolidated financial statements does not contain any objections or qualifications in relation to the entity not being consolidated on a line-by-line basis, and
  3. in the case of an entity with a total revenue, as determined in accordance with the relevant CbC regulations in respect of the fiscal year, that exceeds €50,000,000, its financial accounts, that are used to complete the CbC report for the group of which the entity is a member, are prepared in accordance with an acceptable financial accounting standard or an authorised financial accounting standard;

“NMCE” means non-material constituent entity;

“NMCE simplified calculations” means the simplified income calculation, the simplified revenue calculation and the simplified tax calculation;

“OECD Report of 2015” and “OECD CBCR Guidance” have the meaning assigned to them, respectively, in section 111AJ(1);

“relevant CbC regulations” means the Country-by-Country Reporting regulations of the jurisdiction in which the ultimate parent entity of an MNE group is located, or where the surrogate parent entity is located if a CbC report is not filed by the MNE group in the jurisdiction of the ultimate parent entity, but where an MNE group is not required to file a CbC report in any jurisdiction, it shall mean the OECD Report of 2015 and the OECD CBCR Guidance;

“simplified income calculation” means the qualifying income or loss of an NMCE is equal to the total revenue as determined in accordance with the relevant CbC regulations in respect of the fiscal year;

“simplified revenue calculation” means the qualifying revenue of an NMCE is equal to the total revenue as determined in accordance with the relevant CbC regulations in respect of the fiscal year;

“simplified tax calculation” means the adjusted covered taxes of an NMCE is equal to its current year income tax accrued as determined in accordance with the relevant CbC regulations in respect of the fiscal year;

“surrogate parent entity” means a constituent entity appointed by an MNE group as a sole substitute for the ultimate parent entity, to file a CbC report on behalf of the MNE group.

(2) Subject to subsection (3), notwithstanding section 111AD(3) (Calculation of top-up tax), on the making of an election by the filing constituent entity, the jurisdictional top-up tax calculated for a jurisdiction for a fiscal year, other than additional top-up tax for a jurisdiction for a fiscal year determined in accordance with section 111AF (Additional top-up tax), shall be deemed to be zero where the MNE group or large-scale domestic group, as the case may be, meet the requirements set out in subsection (4), (5) or (6).

(3) An election shall not be made in respect of a jurisdiction under subsection (2) where there is no NMCE of the MNE group or largescale domestic group, as the case may be, located in the jurisdiction for the fiscal year.

(4) The requirements of this subsection shall be met where there is no excess profit determined for a jurisdiction for a fiscal year in accordance with section 111AD(4) (Calculation of top-up tax).

(5) The requirements of this subsection shall be met where:

  1. the average qualifying revenue of all constituent entities of an MNE group or large-scale domestic group, as the case may be, located in a jurisdiction is less than €10,000,000, and
  2. the average qualifying income or loss of all constituent entities of an MNE group or large-scale domestic group, as the case may be, in that jurisdiction is a loss or is less than €1,000,000,

where the average qualifying revenue and average qualifying income or loss of all constituent entities of an MNE group or large-scale domestic group are determined in accordance with section 111AG (De minimis exclusion).

(6) The requirements of this subsection shall be met where the effective tax rate of a jurisdiction for a fiscal year calculated in accordance with section 111AC (Determination of effective tax rate) is equal to or greater than the minimum tax rate.

(7) Notwithstanding sections 111O(1) (Determination of qualifying income or loss), 111U (Adjusted covered taxes) and 111AG(3) (De minimis exclusion), for the purposes of this section, a filing constituent entity may make an election to determine the qualifying income or loss, qualifying revenue and adjusted covered taxes of an NMCE for a fiscal year using the NMCE simplified calculations.

(8)(a) Where a main entity is not an NMCE then none of its permanent establishments shall be considered to be an NMCE but where a main entity is an NMCE then all of its permanent establishments shall be considered to be NMCEs.

(8)(b) In the case of a permanent establishment that is an NMCE, the amount of the NMCE simplified calculations shall be determined under the relevant CbC regulations with respect to such permanent establishment.

(9) All relevant information concerning the application of the simplified calculations safe harbour shall be included in the top-up tax information return for the fiscal year in accordance with section 111AAI (Top-up tax information return).

(10) The elections referred to in subsections (2) and (7) shall be made in accordance with section 111AAAD (Elections).

Relevant Date: Finance Act 2024